The annual cost-of-living adjustment (COLA) is based on a subset of the consumer price index, known as the Consumer Price Index for Urban Wage Earners and Clerical Workers. By extrapolating from recent months’ data and projecting where the September print will land when it comes out on Oct. 14, advocacy groups already have a good idea of what to expect.

For instance, the Senior Citizens League estimated the COLA for 2027 will be 3.5%, while the AARP projected a 3.6% hike. Either way, that represents a significant upgrade over 2026’s COLA of 2.8% and the most since 2023’s massive 8.7% jump, when post-COVID inflation and supply shocks collided with Russia’s 2022 invasion of Ukraine that spiked energy prices.

This time, it’s a different conflict driving oil prices up: President Donald Trump’s war on Iran. As a result, Mideast fighting, coupled with Ukraine’s attacks on Russian refineries, have sent fuel prices even higher. The price of diesel in the U.S. has topped $6.50 a gallon, rippling through anything that’s shipped, harvested or manufactured with the critical industrial fuel.

At the same time, the AI boom has created its own supply crunch for chips and other key technology inputs. Makers of consumer electronics, such as Apple, have raised prices recently as costs climb.

And for good measure, Trump hasn’t given up on his trade war. Despite the Supreme Court striking down his duties under the International Emergency Economic Powers Act, he has used other laws to invoke new tariffs and hiked levies on Canada in July. Earlier this month, Congress also gave Trump new authority to impose 100% tariffs on the top consumers of Russian energy.

Don’t forget more expensive beef, insurance, and utilities—the list goes on. Add it all up, and Social Security must pay out more to beneficiaries so they can keep up with their ever-growing bills.

While all recipients get the same percentage COLA regardless of where they live, those who earned more during their working years receive bigger checks, meaning their annual adjustments are bigger too.

Nationwide, the average monthly benefit for a retired worker is $2,071, according to the Social Security Administration. But the typical check within some states is higher than the U.S. average.

By that measure, retirees in New Jersey have the highest median Social Security check and get $2,256 a month, according to a Motley Fool tally of Social Security data. Based on the COLA estimates for 2027, they should see about $79-$81 more versus $72.49-$74.56 for the nationwide average.

The Garden State is followed by Connecticut ($2,249), Delaware ($2,225), New Hampshire ($2,215), Maryland ($2,181), Washington ($2,144), Michigan ($2,139), Minnesota ($2,135), Massachusetts ($2,121), and Utah ($2,090).

Wealthier retirees are already a major driving force in the U.S. economy, which has remained resilient despite repeated shocks.

In fact, Wall Street veteran Ed Yardeni has dubbed it the G-shaped economy, arguing the notion of a K-shaped economy divided by class obscures a trend divided by generations.

Helped by an extraordinary era of financial and economic gains, baby boomers now have a net worth of nearly $90 trillion, or about 52% of all U.S. household wealth. The Silent Generation, which holds another $20 trillion, is expected to pass much of that on to their boomer kids.

“The concentration of wealth among older generations suggests that consumer spending is increasingly being supported by the spending of accumulated retirement wealth rather than labor income,” Yardeni explained in a note last month.

Indeed, boomers control about 54% of household stocks and mutual funds, worth close to $30 trillion, and own 41% of all household real estate, more than any other generation. 

That’s why boomers can keep spending briskly despite high interest rates and inflation, he said. On top of that, higher interest rates actually work in their favor as investments in fixed-income products like Treasury bonds now yield more.

“This dynamic helps explain why higher interest rates have done less to restrain consumer spending than many economists anticipated,” Yardeni added. “For a large segment of the population, rates are not simply a cost of borrowing. They are also a source of income and the reason that home prices are rising!”