The Iran war has fueled inflation and sent energy costs soaring for everyday Americans.
The Ministry of Labor said on Friday that prices rose by 3.3% in the year ending in March, boosted by a 10.9% increase in electricity prices. Compared to the previous month, prices rose by 0.9% overall, representing the largest single-month increase since the pandemic-induced inflation crisis hit in 2022.
“I was expecting a jump but I didn’t know how much,” said Mary Johnson, an independent analyst for Medicare and Social Security. “This is shocking to the system.”
Sudden inflation is difficult for many Americans, but the elderly and disabled are particularly vulnerable because they live on fixed incomes.
Johnson says the cost reduction “could reset the household budget for many older consumers and could result in savings for retirement.”
Each month, Johnson tracks how inflation would affect the annual cost-of-living adjustment for Social Security benefits, known as COLA. Based on Friday’s inflation report, he says the 2027 COLA could reach 3.2%.
Separately, the Senior Citizens League (TSCL), a nonprofit advocacy group for older Americans, estimates the 2027 COLA to be 2.8% — the same COLA beneficiaries saw in 2026.
Why the 2027 COLA may not be enough
About 75 million Americans receive Social Security benefits each month. Most of them are retired people; for many recipients, monthly interest payments are their only source of income.
According to the Pew Research Center, 27% of Social Security recipients rely solely on their benefits. As of March, the average monthly profit was $1,931.
With inflation rising, it is likely that beneficiaries will see at least some increase in their monthly payments from next year – but by how much remains an open question.
Although Johnson’s analysis shows that the COLA is moving, it is only a first estimate. A lot can happen before the official COLA is announced in October. The final figure is based on inflation trends for the months of July, August and September, and adjusted benefits don’t come out until January 2027 for most.
The problem is: Americans are facing rapidly rising prices right now. And there is no guarantee that today’s volatile prices will have a direct impact on inflation rates between July and September.
“This is a clear example of a structural weakness in the way COLA is calculated,” said Shannon Benton, executive director at TSCL. “Seniors get price increases in real time, but COLA adjustments are delayed and retroactive.”
That means retirees have to endure rising costs for up to a year before seeing any benefit, he adds.
How gas prices may affect inflation in the future
Some analysts say the silver lining is that so-called “core inflation,” which excludes energy costs, is stable. That means the rise in overall inflation could be temporary.
“While higher gas prices are raising inflation expectations, long-term expectations remain stable, which is exactly what policymakers want to see,” said Adam Schickling, an economist at Vanguard, in an emailed comment.
Gas prices can be stubborn, though. They are colder in the days following the US attack on Iran, but it may take weeks or months after the end of the war for them to come back down.
Even in the best-case scenario that the war in Iran ends soon, experts told Money that motorists should expect to pay about $3.50 a liter for the rest of the year.
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