The Social Security COLA Sounds Bigger Than It Feels: 5 Costs That Could Eat Up Your Raise
Social Security recipients will get a nice raise in 2027, thanks to a 3.6% cost-of-living adjustment (COLA) recently announced by the Social Security Administration.
That’s up from 2.8% this year and the highest COLA since 2023, when soaring inflation pushed it to 8.7%.
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There’s one problem: Consumer prices continue to rise as well. In September 2026, the overall inflation rate rose 3.7% year-over-year, according to the U.S. Bureau of Labor Statistics.
Because of sticky inflation, next year’s 3.6% COLA might not be as big as it sounds. Here’s a look at five costs that could eat up your COLA in 2027.
Gasoline
This is the most obvious cost that could swallow your 2027 COLA in a hurry – especially if the Iran War continues to roil the global oil and gas markets.
In September, gasoline prices rose a whopping 34.2% from the previous year, according to the U.S. Bureau of Labor Statistics.
Things haven’t improved much since then. As of Oct. 21, 2026, the average price of a gallon of gas was $4.2644, AAA reported – a gain of 40% from the prior year.
If prices don’t fall very far very fast, U.S. retirees will continue to see their finances “shrink,” said Dmitri Maxim, an AI entrepreneur, economic commentator and chief auditor at MarpoleAI.
"Take a retiree who drives 8,000 miles a year in a car that gets 25 miles to the gallon. That is 320 gallons,” Maxim told MoneyLion. “If today's price gap lasts a year, the same drive costs about $390 more. That is more than two-fifths of the roughly $900 [average] yearly [COLA] raise.”
Electricity
This is another cost that will threaten to eat up COLA raises next year if oil and gas prices remain high. In September, the electricity index rose 4.4% year-over-year, per the BLS.
Prices could keep pushing higher in 2027 amid surging demand for electricity. The U.S. Energy Information Administration (EIA) expects U.S. electricity generation to grow 1.7% in 2027 after climbing 2.2% this year.
One of the key drivers of rising electricity demand is rapid construction of AI data centers, which require a massive amount of power. The cost to build and power data centers has also led to higher household electric bills across the country, according to Consumer Reports.
Consumer Staples
This year’s stubbornly high inflation rate affects all kinds of costs that impact seniors, from food and clothing to household products.
“Prices on everything are sky-high,” Nancy Altman, president of Social Security Works, said in statements shared with MoneyLion. “Social Security beneficiaries are falling behind…as inflation continues to skyrocket. As important as the Social Security COLA is, it is not keeping up with prices.”
Healthcare
One of the biggest issues with the annual COLA is that the formula used to calculate it doesn’t do enough to account for rising healthcare costs, including Medicare.
The monthly Medicare Part B premium for 2027 is projected to be $209.50, according to a recent Medicare Trustees Report. That’s up from $202.90 in 2026. There will also be a 14% increase to the Part D out-of-pocket drug cap, The Street reported.
“For most people, the Part B premium comes out before the Social Security payment reaches the bank,” Maxim said. “The drug deductible goes from $615 to $700. The yearly limit on what a person pays out of pocket for covered drugs goes from $2,100 to $2,400. A retiree who reaches that limit in both years pays $300 more. That is four months of the raise, spent on pills.”
Air Travel
Social Security recipients who plan to travel by air to visit their grandkids or just take a vacation won’t get much relief from the 2027 COLA.
Driven by high jet fuel prices, airline fares in September climbed 22.4% from the previous year, according to the BLS. Fares are expected to continue rising in 2027, Reuters reported in August, citing comments from United CEO Scott Kirby.
"I think you're going to still see gradual increases in fares. Not as big a jump as happened this year," Kirby told a gathering of reporters.
Editor’s note: MoneyLion is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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