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Some Social Security experts said January’s weaker-than-expected price increases are generally welcome news unless you rely on Social Security to pay for everyday necessities.
Former Social Security and Medicare analyst Mary Johnson said seniors could expect their Social Security cost-of-living adjustment (COLA) to rise 1.2% in 2027, based on January’s annual consumer price data released on February 13. This is the smallest increase since 2016, according to government data.
“For many consumers, these numbers may seem inconsistent with the price they pay,” she said in an email.
While the final COLA, typically released in October, is based on inflation data from July, August and September, “these monthly check-ins can give you a glimpse of what the actual inflation data for the third quarter is showing and can help you make retirement financial decisions, such as CD renewals and budgeting,” Johnson said.
In January, Social Security recipients began receiving a 2.8% COLA increase in their monthly checks for 2026.
How was inflation in January?
The annualized pace of the consumer price index (CPI) in January slowed to 2.4% from December’s 2.7%, and was below economists’ average estimate of 2.5%. It was also the smallest increase since May 2025.
Core interest rates, which exclude the volatile food and energy sectors, rose 2.5%, in line with expectations.
The Social Security Administration calculates the COLA each year based on the average annual increase in a portion of the overall consumer price index called the Urban Wage and Clerical Workers Index from July through September.
The urban salaried index primarily reflects a broader index published monthly by the Department of Labor, but may vary slightly. Last month, the overall consumer price index rose by 2.4%, and the index for urban salaried workers rose by 2.2%.
Why does COLA always feel so small?
Prices are still rising, but not as fast. Additionally, the details of the CPI report show that prices for some essential goods and services remain stubbornly rising.
“This report brings mixed news for household finances,” Stephen Kates, a financial analyst at comparison site Bankrate, said in a note after the data was released. “Lower gas prices have given us some breathing room, but it doesn’t erase the cumulative price increases that have already been etched in. Grocery bills are still up 2.9% year over year, and electricity prices are up more than 6%. Families may find some relief at the pump, but everyday essentials continue to cut into their budgets.”
The frigid temperatures that recently gripped much of the country are expected to cause U.S. home heating costs to rise 11% this winter, according to the National Energy Assistance Directors Association.
That’s more than four times the rate of inflation and means average seasonal heating costs will reach about $1,011 per household, about $100 more than last winter and the highest level in four years, said NEADA Executive Director Mark Wolff.
“The rapid increase has worsened our financial difficulties,” he said. “These price increases may be inconvenient for high-income households, but they are devastating for low- and middle-income households. Millions of previously scraped households are being forced into utility debt and out of business simply because they cannot afford to keep their homes warm.”
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Please contact mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
