Inflation’s cooling. It may mean a smaller 2027 Social Security COLA

Weaker-than-expected price increases in January is generally welcome news, unless you rely on Social Security to pay for everyday needs, some Social Security experts said.

Based on annual January consumer price data released Feb. 13, seniors might expect a 1.2% rise in the 2027 Social Security cost of living adjustment, or COLA, said Mary Johnson, retired Social Security and Medicare analyst. That would be the smallest increase since 2016, according to government data.

“For many consumers these numbers, may seem to be at odds with the prices that they pay,” she said in an email.

The final COLA, usually announced in October, is based on July, August and September inflation data, but “these monthly check-ins can give a glimpse of what the actual inflation data indicates for the third quarter, and that can be useful in making retirement financial decisions such as renewing a CD or budgeting,” Johnson said.

In January, Social Security recipients began receiving a 2.8% COLA bump in their 2026 montly checks.

January’s overall consumer price index (CPI) slowed to a 2.4% annual pace from December’s 2.7% and below economists’ average forecast for 2.5%. It was also the smallest increase since May 2025.

The core rate that excludes the volatile food and energy sectors, rose 2.5%, matching forecasts.

The Social Security Administration bases its COLA each year on the average annual increases in a subset of the overall consumer price index called the index for urban wage earners and clerical workers, from July through September.

The index for urban wage earners largely reflects the broad index the Labor Department releases each month, although it sometimes differs slightly. Last month, the overall consumer price index rose 2.4% and the index for urban wage earners increased 2.2%.

Prices are still rising, just not as fast. Plus details of the CPI report show prices of some essential goods and services remain stubbornly elevated.

“For households, this report brings mixed news,” wrote Stephen Kates, financial analyst at comparison site Bankrate, in a note after the data release. “Lower gas prices offer comforting breathing room, but it doesn’t erase the cumulative price increases already baked in. Grocery bills are still up 2.9% from a year ago and electricity prices have climbed over 6%. Families may feel some relief at the pump, yet everyday essentials continue to chip away at budgets.”

The frigid temperatures that blanketed most of the country recently, are projected to push up U.S. home heating costs by 11% this winter, according to the National Energy Assistance Directors Association.

That’s more than four times the rate of inflation and would mean the average seasonal heating costs would reach about $1,011 per household, roughly $100 more than last winter and the highest level in four years, said Mark Wolfe, NEADA’s executive director.

“The sharp increase is driving growing financial distress,” he said. “These increases may be an inconvenience for higher-income households, but for low- and middle-income families they are devastating. Millions of households that were getting by are now being pushed into utility debt and toward shutoffs simply because they cannot afford to keep their homes warm.”

Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.

This article originally appeared on USA TODAY: 2027 COLA could be smallest since 2016 if prices keep cooling