By Elizabeth O'Brien

Social Security recipients would get a bigger raise next year if energy prices stay elevated.

Based on February inflation data, the estimate for next year's cost-of-living adjustment $(COLA)$ is 1.7%, according to Mary Johnson, an independent Social Security and Medicare policy analyst. That figure could move up if oil prices stay elevated after the war with Iran winds down.

"Watch those oil prices," Johnson says. "While gasoline prices were down 5.6% in February, the March jump could drive my estimate much higher."

Johnson's estimates are usually spot on with regard to the actual COLA. The Social Security Administration will announce the COLA for 2027 in October, based on a calculation that compares third-quarter inflation from this year with third-quarter inflation from last year.

The COLA calculation is based on the CPI-W index, a subset of the headline inflation index, which rose 2.2% in February, according to government data released on Wednesday.

Next month's data release will likely tell a different story, as Brent crude oil prices have risen about 30% since the start of the conflict in the Middle East. The CPI-W index weights gasoline heavily, and prices at the pump have soared by about $0.60 a gallon since the war started, according to data from AAA and OPIS, the Dow Jones energy service.

Middle and lower-income retirees are vulnerable to high gas prices and inflation more generally. Bill Korman, CEO of advisory firm BFLagency.com in Annapolis, Md., says he monitors his clients' spending on a quarterly basis. When prices on essentials are up, some have to reduce spending on travel and other non-essentials. Modern technology makes it easy to spend, and he's had success asking clients to use cash for discretionary purchases. "We've reconnected them with the physical," Korman says.

While the COLA helps retirees retain purchasing power, it often falls short. Healthcare costs in particular rise more than general inflation over time. Medical care services rose 4.1% in February over the same time last year, versus 2.4% for all items.

Many seniors don't drive as much as younger Americans, so higher costs of gasoline may not sting as much. Other energy costs are up sharply, though, including home heating oil and natural gas, and there's no way around that.

A small raise in Social Security may help offset some of the increased costs, but will probably still fall short. Many home monitoring devices run on electricity, for instance, and that can increase retirees' utility bills above average.

"It's a hardship," says Johnson, whose neighbors are struggling with the issue.

Write to Elizabeth O'Brien at elizabeth.obrien@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 11, 2026 13:48 ET (17:48 GMT)

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