President Donald Trump’s economic and military policies are driving inflation higher, and Social Security recipients are set to feel the effects in both directions next year.
Independent estimates now project that Social Security’s 2027 cost-of-living adjustment will land between 3.7% and 3.8%, well above recent historical norms.
Nonpartisan senior advocacy group The Senior Citizens League is forecasting a 2027 COLA of 3.8%, while independent Social Security and Medicare policy analyst Mary Johnson projects 3.7%.
Either figure would represent the fifth-largest cost-of-living adjustment in the past 36 years, trailing only the increases of 4.1% in 2006, 5.8% in 2009, 5.9% in 2022, and 8.7% in 2023.
Two distinct Trump policy forces are combining to push consumer prices higher and inflate next year’s Social Security raise significantly above baseline expectations.
Trump’s sweeping global tariffs, including a new round ranging from 10% to 12.5% on more than 80 countries, are raising production costs for U.S. manufacturers and keeping consumer prices sticky.
The more powerful inflation driver, however, is the Trump-led Iran war, which began after the president approved military action against Iran on Feb. 28.
Iran’s subsequent closure of the Strait of Hormuz to most maritime traffic triggered the largest modern-day energy supply disruption, sending fuel prices sharply higher across the economy.
The conflict has rippled well beyond energy, with businesses altering shipping routes, switching suppliers, and paying more for petroleum-based products like plastics and synthetic polymers.
By June 2026, May CPI inflation had risen to 4.2%, the highest level since April 2023, according to financial commentary account The Kobeissi Letter, with core CPI also climbing to 2.9%.
While a larger COLA benefits recipients in the short term, the long-term consequences for Social Security’s financial health are increasingly serious and difficult to ignore.
According to the latest Social Security Board of Trustees Report, the program’s long-term 75-year unfunded obligation has ballooned to $29.3 trillion through the year 2100.
More immediately, the Trustees estimate the Old-Age and Survivors Insurance trust fund’s asset reserves will be fully exhausted by the fourth quarter of 2032.
Depletion of those reserves would not mean Social Security goes bankrupt, but it would trigger automatic benefit cuts of up to 22% for retired workers and survivors of deceased workers.
The Trustees’ financial models are built around assumptions of modest annual COLAs, meaning a 3.7% or 3.8% raise in 2027 could drain reserves faster than currently projected.
A precedent already exists: Social Security’s 2026 COLA received a modest Trump bump from tariff-driven inflation, and the Trustees subsequently moved the OASI exhaustion date three months earlier than the prior year’s estimate.
Social Security has already made history in recent years, with the average monthly retired-worker benefit surpassing $2,000 for the first time since the Social Security Act was signed into law in August 1935.
This year, recipients received a 2.8% payout boost, partly attributable to Trump’s tariff and trade policies, which modestly lifted inflation ahead of that adjustment cycle.
Until elected officials take meaningful steps to strengthen Social Security’s finances, larger annual raises will continue to carry a steep hidden cost for both current and future beneficiaries.
