Retirement Social Security

Newest 2027 Social Security COLA Projection Higher Than Before - Here's Why

The war with Iran and other factors are driving up COLA projections.

By Paige Cerulli , Edited by Sara Albertelli

Updated April 15, 2026

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For many retirees, Social Security is a key component of their retirement plan, but rising costs could make living on a budget challenging. According to new projections, Social Security recipients should receive a cost-of-living adjustment (COLA) next year to help keep up with those growing costs.

While receiving a larger benefit sounds like a perk, the truth is that the COLA increase is driven by rapidly rising costs, including the climbing fuel costs resulting from the war with Iran.

Here's what to know about how your Social Security and your budget might be affected.

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Projections for an increased 2027 COLA

Mary Johnson, an independent Social Security and Medicare policy analyst, is projecting that the Social Security COLA for 2027 could climb to 3.2%. Johnson previously forecast a 1.7% COLA increase in March but adjusted her estimate because of March consumer price index data. The data indicates that in March, inflation reached the highest level in almost two years, and the COLA increase needs to be large enough to help recipients cope with those higher prices.

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Projections for a steady 2027 COLA

While Johnson is predicting a COLA increase, The Senior Citizens League predicts that the 2027 COLA is going to be 2.8%, which would be the same as the 2026 COLA. The Senior Citizens League has predicted the 2.8% COLA for the past two months, but there's still plenty of time for the League and for Johnson to adjust their predictions.

How COLA is calculated

COLAs are intended to ensure that Social Security benefits keep pace with inflation, and they're calculated based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The Bureau of Labor Statistics calculates CPI-Ws monthly.

COLAs are calculated by comparing the average CPI-W for the third quarter of the current year to the average CPI-W for the third quarter of the previous year. If the average CPI-W increased, then it reflects an increased COLA. If it didn't increase, then there is no COLA for that year.

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How energy costs are driving the COLA up

The CPI-W tracks the price of certain goods, including energy. In fact, energy accounts for about 6.2% of the CPI-W index, meaning changes in energy costs could have a significant effect on the index and on the year's COLA.

According to the Bureau of Labor Statistics' March 2026 CPI-W, gasoline prices increased by 21.2% in March, marking the largest monthly price increase since the data was first published in 1967. Additionally, energy prices increased by 10.9% during March, which is the largest monthly increase since September 2005.

How the war with Iran is affecting oil and gas prices

On February 28, the United States launched attacks on Iran, and in response, Iran restricted shipments of oil through the Strait of Hormuz, a major transport route through which approximately 20% of the world's oil passes.

According to the U.S. Energy Information Administration, crude oil prices climbed dramatically during March, and the price of Brent crude oil surpassed $100 per barrel on March 12, increasing throughout the rest of the month. By March 30, the average price of retail gasoline was $3.99 per gallon, while diesel averaged $5.40 per gallon. The climbing prices affect the March CPI data and drive up COLA projections.

What the climbing CPI-W means for beneficiaries

The CPI-W indicates that prices are climbing, and Social Security beneficiaries need more money to keep up with those increased costs. But the COLA won't take effect until the January 2027 benefits. Until then, beneficiaries are left to cover these increased costs on their own with their existing Social Security benefits and any other resources they might have.

That's a significant financial challenge, especially if the war with Iran doesn't quickly come to an end. Critics of Trump have warned that this war could become a "forever war" with no projected end, meaning the country could face increased oil costs, higher energy costs, and higher overall inflation indefinitely.

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How COLA projections could change

These initial COLA projections are just estimates, and many factors can still affect the estimates and the final Social Security COLA. If the war with Iran comes to an end and energy prices drop, that COLA should also drop. If the war is extended and prices continue to increase, the COLA could also increase.

Since the COLA is calculated based on CPI-W for July, August, and September, it won't be officially announced until October. The estimates provide an early idea of what to expect, but there's still plenty of time for it to change.

Bottom line

The Social Security COLA helps beneficiaries cover increased costs, and current projections indicate the COLA is likely to increase for 2027. However, that also reflects the fact that Social Security recipients are already facing higher prices, such as energy costs, and if prices don't come down, beneficiaries are going to face those costs for over six months before receiving an increased Social Security payment.

If you're approaching or are in retirement, it might be time to review and potentially revise your retirement plan. Consider consulting with a financial professional who is able to evaluate your retirement plan so that you're prepared to deal with climbing costs.

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