Key Points
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Two of President Trump’s decisions have boosted the U.S inflation rate and Social Security’s 2027 cost-of-living adjustment (COLA) estimate.
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However, beefier Social Security benefits pose a problem for a program whose asset reserves are dwindling.
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Additionally, Trump’s flagship tax and spending law, the “Big, Beautiful Bill,” can speed up the timeline to sweeping Social Security benefit cuts.
Last year was filled with history-making moments for America’s leading retirement program, Social Security. In addition to Social Security celebrating its 90th “birthday,” 2025 marked the first time that the average monthly retired-worker benefit exceeded $2,000.
History was made this year, as well, with a fifth consecutive year in which Social Security’s cost-of-living adjustment (COLA) met or surpassed 2.5% — something that hadn’t been witnessed in almost three decades. Social Security’s COLA is essentially the annual raise given to beneficiaries to counter the effects of inflation (rising prices) and prevent a loss of purchasing power.
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Early independent estimates suggest that Social Security’s 2027 COLA will be historically high, thanks in part to decisions made by President Donald Trump. However, a beefier raise comes with potentially devastating consequences for America’s top retirement program.
President Trump delivering remarks. Image source: Official White House Photo by Joyce N. Boghosian.
This may be the fourth-highest COLA in the last 36 years
When the prevailing inflation rate rises, so does Social Security’s cost-of-living adjustment. While a modest level of inflation is normal and healthy for the U.S. economy, two policy decisions by President Trump have provided a boost to inflation, and thus Social Security’s 2027 COLA forecast.
The first modest inflationary bump comes courtesy of the president’s tariff and trade policy. Trump unveiled sweeping global tariffs in early April 2025, along with higher reciprocal tariffs for select countries deemed to have adverse trade imbalances with America. Although the U.S. Supreme Court struck down most of these tariffs in February 2026, Trump used a separate justification to reinstate sweeping global tariffs.
Adding duties to unfinished imported goods can increase production costs for U.S. manufacturers, which are then passed on to consumers. Former Fed Chair Jerome Powell frequently pointed to the price stickiness of Trump’s tariffs in the goods sector as a catalyst for elevated inflation.
But the inflationary surge we’ve observed in recent months traces back to President Trump’s decision to attack Iran on Feb. 28. Shortly after this military operation commenced, Iran closed the Strait of Hormuz to most commercial vessels, effectively halting the flow of 20 million barrels of petroleum liquids per day.
US inflation is red hot.
1. CPI Inflation: 3.8%, highest since May 2023
2. PCE Inflation: 3.8%, highest since May 2023
3. PPI Inflation: 6%, highest since March 2023
4. Services Inflation: 3.4%, highest since Sept 2025
5. Shelter Inflation: 3.3%, highest since Sept 2025
6…. pic.twitter.com/u8kaSN54G3— The Kobeissi Letter (@KobeissiLetter) May 28, 2026
Energy markets reacted swiftly to having 20% of worldwide crude oil demand tied up by the Iran war. Gas prices have soared at the fastest pace in over 30 years, while diesel prices have jumped by an even steeper percentage.
Between February and April, trailing 12-month inflation rose by 140 basis points to 3.8%. Independent estimates for Social Security’s 2027 COLA also jumped dramatically.
After holding its 2027 COLA estimate steady at 2.8% for several months, nonpartisan senior advocacy group The Senior Citizens League increased its prediction to 3.9% following the April inflation report. Meanwhile, independent Social Security and Medicare policy analyst Mary Johnson has more than doubled her 2027 COLA forecast over the past couple of months from 1.7% to 4.2% after the April inflation data.
If Johnson’s high-end estimate proves accurate, a 4.2% cost-of-living adjustment to benefits next year would represent the fourth-largest raise since 1991 (5.8% in 2009, 5.9% in 2022, and 8.7% in 2023). In other words, the president’s policies should lead to a sizable “Trump bump” for Social Security beneficiaries in 2027.
Image source: Getty Images.
Trump’s decisions can speed up the timeline to sweeping Social Security benefit cuts
While a beefier Social Security check in 2027 will undoubtedly put a smile on the faces of the program’s more than 70 million traditional beneficiaries, this higher payout comes at a steep cost to the program.
To be crystal clear, Social Security’s financial outlook was shaky long before Donald Trump was elected president. Every year since 1985, the Social Security Board of Trustees has cautioned of a long-term (75-year) unfunded obligation. In plainer terms, projected income in the 75 years after the release of a Trustees Report is estimated to be insufficient to cover outlays (benefits, including annual COLAs, and administrative expenses to operate Social Security).
In 2025, this 75-year funding shortfall was estimated at $25.1 trillion, and it continues to climb.
However, the prevailing concern is the projected asset reserve depletion of the Old-Age and Survivors Insurance trust fund (OASI). The OASI, which is responsible for doling out monthly benefits to retired workers and survivors of deceased workers, won’t go bankrupt or halt payments. But if its asset reserves are exhausted, sweeping benefit cuts estimated at 23% may be necessary by 2033.
The Social Security Board of Trustees rely on modest COLA estimates in their modeling. However, cost-of-living adjustments that come in substantially above the historical average, such as Mary Johnson’s 4.2% forecast for 2027, threaten to drain the OASI’s asset reserves even faster. In short, the bigger the annual raise, the faster the OASI’s asset reserves may deplete.
Furthermore, Trump’s flagship tax and spending law, the “Big, Beautiful Bill,” is doing Social Security no favors. A myriad of temporary tax breaks, including the senior deduction, no tax on tips, and no tax on overtime, will reduce the amount of earned income subject to the payroll tax from 2025 through 2028.
More than 91% of Social Security’s income is collected through the 12.4% payroll tax on earned income. With less earnings applicable to the payroll tax, the Social Security Administration’s Office of the Actuary estimates that Trump’s tax and spending law will cost the program an additional $168.6 billion from 2025 through 2034, as well as move the OASI’s asset reserve exhaustion timeline forward by three months, to the fourth quarter of 2032.
In short, there’s a price to pay for Social Security Trump bumps and tax cuts — and that bill may come due sooner than initially expected.
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36 Comments
Motley Fool used to be a source for investment advice, not for political screeds. This article ignores several major causes for Social Security insolvency in favor of some propagandistic tropes. For example, another political party (which apparently MF is in favor of) added significant new UNfunded obligations to SS, greatly hastening its collapse. Not to mention the original sin by legislators of filling the SS account with IOU’s at the federal level. But hey, why worry about fiscal facts when you can emotionally rant instead.
Your points are all spot on. To the one about the unfunded obligations, that party that MF supports added millions, MILLIONS of people ( possibly more than 10 million) from around the world, and who shouldn’t even be here, to the “Social Seurity dole.”
These are people who haven’t paid one CENT into the system and never will. Instead, they take for themselves and their families (that we are now supporting) the money that all of us paid into it because we were FORCED to. As an options trader, I could have easily 10’xd the $100K+ I was forced to pay into that Ponzi scheme, only to be told decades later that I won’t get what I was promised because the funds are running out. It’s descpicable.
Article too bloody long. I quit reading.
That’s part of the reason our country is in bad shape. Too many people don’t have the patience to educate them selves.
If you can’t even finish reading this article to perhaps use it to make an informed decision one way or the other, how can you expect our elected representatives to do the same? Especially since most bills are 10s, 100s or even thousands of pages. Hope this reply was not too long for you to finish.
Sounds like our politicians, “That bill is too bloody long to read, so I’ll just vote yes.” (I would have made my reply longer, but the you would not finish reading it). 🙂
remember Pelosi when she put aca to vote want to know wats in it you have to vote for it and the demacrap sheep said yes queen Nancy but how much stock in ins did she buy
The COLA increase is welcome to keep up with prices. However, social security income is taxed on the 1040 form where SSI over $44,000 is taxable. the $44,000 dollar limit has not been changed since the tax began in the 70’s, so the COLA gets eaten by the addition income tax. In the words of economists it is a very regressive tax and penalies retires for remaining productive full or partime workers where they contribute taxes and to a healthy economy.
This is an easy legislative change if Congress had any real concern for its senior citizens and those who are approaching retirement age and will be shocked to find out how this tax works. Fix it congress, it is in your power.
Congress is stealing from the fund . They are all criminal. Get with the program Trump!!
I no longer have any respect for any politicians. For the most part all we ever see is talking heads on the news discussing problems but never doing anything about them but line their own pockets, while working part time and receiving full time pay and benefits. Republicans never wanted social security for anyone and the dems have gone full blown crazy thinking communism is the answer. The social security problem could be solved if our politicians truly had the desire, there is more than enough stupid programs that could be cut while still caring for the elderly, truly disabled and poor. but they will never do it.
Agreed, like all the BILLIONS of dollars the Somalies stole (with the help of Dims) from Medicare.most can’t even speak English, much less read & understand enough to complete forms And to think, those of us who live on our Social Security (that we & our employers paid into) checks, still have to pay into Medicare. Every COLA raise I’ve gotten, is quickly taken away by the Medicare payment, except for a few dollars. We need to recover every dime from the Somali fraud & Hospice & Medicare fraud, & that money dumped into Social Security. Sell all their fancy Lamborghinis, BMW’s, Mercedes, etc🤬🤬🤬🤬
That Somali theft of our hard-earned tax dollars is so infuriating. Especially knowing that it was perpetrated by people from a country where the average IQ is 83.
Pure political crap. I stopped paying attention to Motley Fool years ago. Garbage.
and the kings men will knocking on your doorto collect what is due to the king sos
Can’t, Biden abdicated his throne.
Wow, if this isn’t the most biased liberal agenda article from Motley, I don’t know what is. Why is everything always Trump’s fault while fools like Motley kept quiet on Biden doing absolutely nothing for 4 years? Can anyone actually write an informative article that just reports, rather than blaming, criticizing, condemning, or sentencing a single person for the last 30+ years of Social Security administrative management policies? The minute an author, supported by a liberal entity like Motley, starts pointing fingers at a sole individual -in this case, Trump, the article, the author, and the information becomes just another political stab based on a personal viewpoint/opinion. Very unprofessional while clarifying why 90% of the U.S. population mistrusts the media and those writing to push their personal bias and agenda.
The title “Social Security Trust Fund” needs to change it’s name.
‘Trust Fund’?!!
Bawahahahha
Why do they always caim that SS is going broke but welfare seems to not have any issues. We contributed to the SS Trust Fund (isn’t that an odd combo: Trust Fund that one group has used to fund benefits to everyone. My father worked for SS in 1968 and spoke about turning down a little old lady who ran a corner grocery store with her husband. She never reported any income, it was all reported in his name so she had no SS benefits in spite of contributing the the US economy. Recent immigrants could bring in a parent who never paid a penny in US taxes could receive SS and Medicare within 90 days of arrival.
Who writes this information that is so incorrect. My memory of the Social Security cola was quite different than what this person said. So I asked Google to show me the Social Security cola for the last 10 years. You can ask too! Take a look below and then you decide for yourself how true this article is.
“ The Social Security Cost-of-Living Adjustment (COLA) over the last 10 years ranges from a low of 0.3% in 2017 to a peak of 8.7% in 2023.The official historical percentage increases for each year are as follows:2026: 2.8%2025: 2.5%2024: 3.2%2023: 8.7%2022: 5.9%2021: 1.3%2020: 1.6%2019: 2.8%2018: 2.0%2017: 0.3%
SS insolvency is a slow train wreck many, many decades in the making. When it takes guts, fortitude, and a non-relenting focus on a serious problem, our leadership in Congress slither away. I paid for decades into this program that if handled the way it has been handled, any private industry would have been humiliated, prosecuted, and put on display for all to see. But of course, this is government, so they slither on.
What they really should’ve said was;
“The FIX for SocSec has been moved up”, cuz’ DC will NOT make a move to fix it until the Trust Fund is almost empty.
Just like they did when they waited till almost the last day back in the ’80’s.
p.s. The Motley FOOL lives up to its’ name once again!
Most informed individuals are now fully awake. The Social Security fund has been stolen and doled out to anyone the corrupt communist politicians decide will most benefit them and partners. Simply put, just a large money laundering, fraudulent, government controlled operation, stealing from the American citizens for decades. Your publication is just another avenue for the fake news coverup. Disgusting fools.
SS is nothing but a Ponzi scheme and always has been. AARP is always sending out emails and letters to support saving SS and I always refuse. The reason is that although I receive SS, I was not free to turn it down and then pay taxes on it. It’s one of many reasons 4th of July is tainted because the DOI that says I am entitled to life, liberty, and the pursuit of happiness. My life is not my own since the government controls much of ii. I do not have the liberty to not pay for government programs I don’t want and them get taxed for them, and it is supposed to be my happiness, not everybody else’s supported by the onerous tax code at every level.
It’s all academic. The Medicare deduction increase is magically almost the same amount as the SS increase. Last year my net SS Increase was $1.00 . Whoopie!
Big deal, we get a COLA increase of a small percent and our Medicare premiums rise, so it’s a wash! They never mention that when they tout the SS increases! My Medicare was $97/month at the end of 2019, and now it’s double that.
WHAT NOBODY TALKS ABOUT, IS THAT THE COSTS OF MEDICARE, EATS UP THE MAJORITY OF THE INCREASE!! COLA doesn’t give RECIPIENTS ANYTHING. Here’s ANOTHER shot at Social Security, ANY INDIVIDUAL WHO DIES before EVER getting a penny that they put in, doesn’t get dispensed!! How many MILLIONS of people didn’t live to 65? Where did ALL OF THEIR CONTRIBUTIONS GO??
Because all the politicians in office going back to at least the Nixon era have been using it as a slush fund, putting in an i.o.u while taking it out for for their pet projects. If all the money was left alone, and managed by a decent fund manager, there would be more than enough money to fund it past anyones lifetime today.
More than 91% of Social Security’s income is collected through the 12.4% payroll tax on earned income. This is employed and former employed people’s money that paid into SS, not a benefit. The government has borrowed over a trillion dollars from these funds to artificially balance their budgets.
wow…..this is total propaganda. I have been on Social Security since 2010 and I can tell you IF we get a 3% increase this year……it is not the highest in 30 years. We had 3 back to back years under Biden which were higher.
Oh it’s always President Trump’s fault. I am finished forever with anything associated with the motley fool. fools indeed.
Federal Income Tax should be paused until the Federal government gets the FRAUD under control and the GUILTY parties get punished SEVERELY.
the fix is easy tax robots by how many jobs they eliminate at the social security rate with no top limit
Time to raise the rate of contribution and make the fund independent of any other claim than for retirees. Allow at least a third of the fund to be invested in American businesses, such as the S&P.
Half of the comments here are incorrect. Especially the one where people can enter the country and get social security and Medicare in 90 days. NO WAY, benefits are based on quarters worked (usually 10 years), legal status (green card AND paying in). Yes, Trump did speed up the depletion of the SS trust fund by tariffs causing inflation and cutting tax collections. Population is a problem: the reduced number of immigrants paying into the account and the lower birth rate reduces tax income. The best solution I’ve read is to increase the cap on the income that is taxed, (billionaires pay on $184,500). Yes I’m a green card holder and paid in for 30 years, I was also smart enough to postpone my SS until age 70. Planning and saving makes retirement enjoyable. My son’s are doing the same, pass it along.
Mybe if the GOV. payed back the money they “borrowed” with interest SS would not be in as bad a of a situation as it is !!
The article is incorrect in that tips and overtime are still subject to Social Security and Medicare withholding. The $6,000 additional deduction for seniors is, in essence, an increased standard deduction. As such, it reduces taxable income but has nothing to do with payroll taxes