Why Social Security’s Bigger COLA May Not Go Far: 5 Expenses That Could Cancel It Out

Social Security beneficiaries are set to receive a larger increase in 2027 after the Social Security Administration announced a 3.6% cost-of-living adjustment, or COLA.

That marks an increase from 2.8% this year and the biggest COLA since 2023, when inflation pushed the figure to 8.7%.

The catch is that consumer prices are still climbing. In September 2026, the overall inflation rate was up 3.7% from a year earlier, according to the U.S. Bureau of Labor Statistics.

With inflation still sticky, the 3.6% increase may not feel as generous as it sounds. Here are five expenses that could quickly absorb much of the 2027 COLA.

Gasoline

Gas prices are one of the clearest threats to the value of the 2027 COLA, particularly if the Iran War continues to disrupt global oil and gas markets.

In September, gasoline prices were 34.2% higher than a year earlier, according to the U.S. Bureau of Labor Statistics.

Conditions have not improved much since then. As of Oct. 21, 2026, AAA said the average price of a gallon of gas was $4.2644, about 40% above the level from the previous year.

If prices do not fall sharply soon, retirees may keep feeling the squeeze, 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

Electric bills are another expense likely to pressure COLA gains if oil and gas prices stay elevated. In September, the electricity index rose 4.4% from a year earlier, according to the BLS.

Prices could keep moving higher in 2027 as electricity demand grows. The U.S. Energy Information Administration expects U.S. electricity generation to rise 1.7% in 2027 after increasing 2.2% this year.

Much of the demand surge is being driven by rapid construction of AI data centers, which use large amounts of power. Consumer Reports has also said the cost of building and operating those facilities has helped push up household electricity bills nationwide.

Consumer Staples

Persistent inflation continues to affect everyday costs that matter to seniors, including food, clothing and household goods.

“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 shortcomings of the annual COLA is that the formula does not fully reflect 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, up from $202.90 in 2026. The Street also reported a 14% increase in the Part D out-of-pocket drug cap.

“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

Retirees hoping to fly to see family or take a trip are unlikely to get much relief from the 2027 COLA.

Fueled by high jet fuel costs, airline fares in September were 22.4% higher than a year earlier, according to the BLS. Reuters reported in August that fares are expected to keep rising in 2027, 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.