Social Security checks are getting their biggest raise since 2023. Inflation may eat it anyway

By: Maura Barrett Posted September saw inflation rise yet again, and the war with Iran is driving much of it, as consumer prices rose 3.7% over the past year, according to new data from the Bureau of Labor Statistics. That’s slightly hotter than the 3.6% economists expected. Prices rose 0.6% in September alone.

The same report set the size of next year’s Social Security raise. The Social Security Administration announced Wednesday that beneficiaries will get a 3.6% cost-of-living adjustment, or COLA, in 2027. That’s the largest increase since 2023.

The war has disrupted oil flows out of the Persian Gulf for months, and the effects are showing up across the economy. Fuel oil prices are up 74% from a year ago, gasoline is up more than 34%, and airfares are up more than 22%, according to BLS data. Natural gas utility service rose 5%, and electricity rose 4.4%.

At the pump, the national average for regular gasoline was $4.34 a gallon Tuesday, according to AAA. That’s up from $2.98 before the conflict began in late February.

Supply hasn’t recovered. Only about four ships a day are moving through the Strait of Hormuz, compared with roughly 80 this time last year, according to the International Monetary Fund’s PortWatch tracker.

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Core inflation, which strips out volatile food and energy prices, rose 2.6% over the past year. That was also above forecasts, a sign that higher costs are beginning to spread beyond fuel.

The numbers cut against President Donald Trump’s message on the campaign trail.

“Your costs are coming way down anyway,” Trump told supporters at a midterm rally in Alaska Tuesday, adding that once the war ends, “prices are going to come tumbling down. They already are.”

Global trade leaders say the unpredictability is what sets this moment apart. Speaking in Bangkok on Wednesday, World Trade Organization Director-General Ngozi Okonjo-Iweala said the global economy is holding up better than many expected.

“The only difference with this crisis is the uncertainty that creeps in all the time,” she said. Okonjo-Iweala added that the economy is “showing resilience, surprising to us,” but said that “doesn’t mean we should be complacent.”

For the tens of millions of Americans who rely on Social Security, the 3.6% raise is welcome. But Robert Brokamp, senior retirement advisor at The Motley Fool, said many beneficiaries already feel behind.

“The challenge with the COLA is it’s always backward looking, so it’s based on what happened in the past,” Brokamp told Scripps News. The adjustment is based on average prices from July through September, but it doesn’t take effect until January.

Whether it’s enough depends largely on what happens with the war, Brokamp said. If the conflict is resolved and energy prices fall, the raise could outpace retirees’ actual costs.

“But if for some reason, energy prices continue to rise, the COLA may not be sufficient,” he said.

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Brokamp said the headline number doesn’t tell the whole story for any one household.

“There’s the overall inflation rate and then there’s your personal inflation rate,” he said. Someone who drives a lot will feel today’s prices far more than someone who mostly stays home.

Excluding energy, Brokamp said, inflation is closer to 2.5%. Prices for groceries are up less than 2%, while eating out is up more than 3%. Medical costs, a major concern for retirees, are up about 2.5% overall, although hospital costs are up closer to 5%.

To stretch a fixed income, Brokamp suggests:

– Moving cash to higher-yield accounts. Rate hikes mean many savings accounts now pay more, but the average checking account often doesn’t. Brokamp says retirees should look for between 3.5% and 4% on their cash.

– Investing for the long term. Stocks have historically been the best long-term hedge against inflation, and dividends as a group tend to grow faster than prices. He cautions against investing any money needed within the next five years.

– Considering part-time work. About half of retirees who go back to work do so for financial reasons, and half for social reasons, according to Brokamp. He noted that beneficiaries who haven’t reached full retirement age, which is 67 for anyone born in 1960 or later, may have some benefits temporarily withheld if they earn above an annual limit. Those benefits are paid back later.

The hotter report puts more pressure on the Federal Reserve. The Fed raised interest rates in September for the first time in three years. Minutes from that meeting show most officials expect one more increase before the end of the year. The central bank meets again Oct. 27 and 28.

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