Latest government data shows the pace of inflation climbed to the highest level in nearly two years.

That could prompt a higher Social Security cost-of-living adjustment for 2027, particularly due to rising gasoline prices, one estimate finds.

The Social Security cost-of-living adjustment for 2027 could climb higher as latest government data shows a jump in inflation and gasoline prices, according to one latest estimate.

The cost-of-living adjustment, or COLA, could be 3.2% in 2027 due to sharply rising gasoline prices, an independent Social Security and Medicare policy analyst. That is up from a 1.7, according to Mary Johnson% COLA rise Johnson had forecast in March.

Johnson’s estimate is based on March consumer price index data released Friday that shows inflation climbed to the highest level in nearly two years.

Social Security and Supplemental Security Income beneficiaries receive an adjustment to their benefits each year through the COLA, which is aimed at helping to ensure that inflation does not weaken the purchasing power of their benefits.

Separately, the Senior Citizens League, a nonpartisan senior group, estimates the COLA could be 2.8% in 2027 based on the latest inflation data, unchanged from its forecast in March.

In 2026, about 75 million Social Security and Supplemental Security Income beneficiaries received a 2.8% cost-of-living adjustment. That pushed retirement benefits up by $56 per month, on average, starting in January, according to the Social Security Administration.

In the past decade, the COLA has averaged 3.1%, according to the Social Security Administration. Yet as inflation spiked following the Covid-19 pandemic, beneficiaries saw record high increases of 5.9% in 2022 and 8.7% in 2023. That was followed by more modest increases in recent years. This also touches on aspects of dividends.

How the COLA reflects inflation

A forecast for a higher COLA is not necessarily excellent news for retirees, who have to absorb the shock of higher prices, according to Johnson.

“They’ve always felt that the COLA undercounts their real experience of inflation,” Johnson remarked.

A September AARP survey found that 77% of Americans age 50 and over do not think a 3% COLA is enough to keep up with rising prices.

Some 72% of respondents remarked an surge of 5% or higher would be sufficient to cover everyday expenses, the AARP survey found, while 26% remarked an 8% expansion would be necessary to keep up with rising costs.

The Social Security COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, which tracks price changes for certain goods and services.

The annual COLA adjustment is calculated by comparing CPI-W data for the third quarter of the current year with CPI-W data for the third quarter of the previous year. The percentage expansion from year to year determines the COLA.

The CPI-W increased 3.3% over the past 12 months, according to data released by the Bureau of Labor Statistics on Friday.