The Social Security Administration confirmed a 3.6% cost-of-living adjustment for 2027. It is the largest annual benefit increase since 2023. The adjustment will raise retirement benefits by an average of $75 a month.
The 72 million Americans receiving Social Security will see the higher amount starting January 2027. Several million Supplemental Security Income beneficiaries get their increase a few days earlier. Their payments go up Dec. 31, 2026.
The 2027 COLA is larger than last year’s. It remains well below the 8.7% adjustment issued in 2023, when inflation hit its highest level in more than 40 years and drove the biggest Social Security increase since 1981.
Also read: New Social Security bill seeks to lower retirement age
What the Social Security increase means for monthly payments
The 3.6% COLA applies to both Social Security and SSI benefits. Commissioner Frank Bisignano said the adjustment will give greater financial stability to 76 million Americans. The SSI-only beneficiary population accounts for the gap between that figure and the 72 million Social Security recipients.
The 3.6% increase translates to roughly $72 more per month for a beneficiary currently collecting $2,000. The net check amount will depend on Medicare premium adjustments.
Medicare Part B premiums are projected at $209.50 per month in 2027, up from the current $202.90. Most enrollees have premiums deducted directly from their Social Security payments, leaving a net deposit smaller than the gross COLA percentage implies. Beneficiaries paying IRMAA surcharges carry Part B deductions and income-based surcharges simultaneously, leaving a deposit that can fall well below what the 3.6% headline suggests.
Why the 2027 COLA is higher than last year
The COLA is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as the CPI-W. The Social Security Administration compares the average CPI-W from the third quarter of the prior year with the average from the third quarter of the current year.
Bureau of Labor Statistics data show the CPI-W climbed 3.9% over the 12 months through September, with gasoline prices among the main contributors to that gain.
The 3.6% COLA lands slightly below the 3.9% CPI-W figure. Comparing quarterly averages rather than a single month’s reading produces a final number that does not precisely match the most recent annual inflation figure.
How Medicare premiums reduce the net increase
What the SSA announces as the COLA and what beneficiaries see in their monthly checks are two different numbers. Medicare Part B premiums are deducted directly from Social Security payments. Part D prescription drug premiums can also reduce the monthly deposit.
Higher-income beneficiaries face additional charges through the income-related monthly adjustment amount, known as IRMAA. Those surcharges are based on income reported two years prior. For beneficiaries subject to IRMAA, the net gain from a 3.6% COLA can shrink considerably.
Beneficiaries who plan around the headline percentage may get a surprise in January. The Social Security Administration will send personalized COLA notices in December. Those enrolled in paperless delivery can access their notice through a My Social Security account starting in late November.
Why many retirees say 3.6% COLA is not enough
AARP data show that about 40% of Social Security beneficiaries age 65 and older rely on the program for at least half of their income.
Much of that population has little room to absorb shortfalls when the COLA does not keep up with actual spending. Healthcare costs in particular have outpaced the CPI-W measure the adjustment is based on.
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An AARP survey found that 76% of respondents said a 3.5% COLA would not be enough to cover rising expenses. AARP CEO Myechia Minter-Jordan said the adjustment is critically important for older Americans dealing with higher costs for groceries, routine bills, and healthcare.
The CPI-W tracks the spending patterns of urban wage earners, a group whose healthcare and housing costs run lower than those of most retirees. Older households put more of their budgets toward those two categories than the index captures.
The Bureau of Labor Statistics tracks the CPI-E as an alternative, weighting healthcare and housing more heavily. Several bills in recent Congresses have proposed switching the COLA calculation to it, but none have become law.
What Social Security beneficiaries should do before January
The Social Security Administration will load personalized COLA details into My Social Security accounts starting in late November. Nov. 18 is the deadline to sign up for paperless notices.
After that date, the SSA mails notices in December to anyone not enrolled in the online system, making it important for beneficiaries with outdated mailing addresses to update them beforehand.
Medicare Part B and Part D premiums should be reviewed alongside the COLA before making any budget changes. The two figures together give a clearer picture of the actual net monthly increase. Mailing addresses on file with the Social Security Administration should also be confirmed before the December notice cycle.
Retirees whose spending plans are built around Social Security income need the actual net change to budget accurately. Medicare premiums and IRMAA surcharges each factor into the deposit in ways the announced percentage does not capture.
A tax professional or fee-only financial adviser can provide a more accurate net figure before the December notices arrive.
Related: 2027 Social Security COLA could see a larger increase
