The U.S. Social Security Administration ( SSA ) stated on Wednesday that the cost-of-living adjustment for Social Security in 2027 ( COLA ) will be 3.6%.
Cost of living adjustments, namely COLA, will involve annual inflation-based adjustments to social security benefits and supplementary income guarantees ( SSI ).
The institution stated that social security retirement benefits will increase by an average of $75 per month.
The Director of the Social Security Administration, Frank Bisignano, stated in a declaration: "Social security will implement this cost-of-living adjustment for 76 million Americans, providing them with greater financial stability."
According to SSA, approximately 72 million social security recipients will see an increase in benefits in January. The organization stated that around 7.3 million SSI beneficiaries will receive higher payments starting from December 31st.
The 3.6% forecast for 2027 COLA is in line with predictions by social security experts, who last month estimated that the growth rate would be between 3.5% and 3.6%.
Higher COLA appears as inflation heats up
The 3.6% increase in 2027 COLA represents the largest benefit increase since 2023. In 2023, beneficiaries enjoyed a 8.7% rise in benefits, which is the highest level in forty years, in order to cope with the rising inflation.
The COLA for 2026 is 2.8%.
The latest government inflation data released on Wednesday shows that the rise in consumer prices is accelerating. Over the past 12 months, the Consumer Price Index has risen by 3.7%, with gasoline prices increasing significantly.
According to data from the American Association of Retired Persons ( AARP ), among Social Security beneficiaries aged 65 and above, approximately 40% rely on this program for at least half of their income.
A recent survey by AARP found that 76% of respondents stated that 3.5% of COLA is not sufficient.
AARP CEO Myechia Minter - Jordan stated in their declaration that social security COLA is "of paramount importance" as it helps millions of Americans cover their rising daily expenses, including food and groceries, utility bills, and healthcare.
Minter-Jordan indicates: "Currently, elderly Americans face many financial risks: one-fifth of them do not have retirement savings, and more people felt financially insecure this year than last year."
How to calculate your 3.6% welfare increase
Beneficiaries can multiply their current monthly benefit amount by 3.6%, which is 0.036, to estimate the increase in the check amount for 2027.
However, it should be noted that the increase in premiums for part Medicare B or part D in 2027 – these fees may be deducted directly from the benefit checks – will affect the actual amount received by the beneficiaries each month.
According to the report from the trustee under Medicare, the expected standard monthly premium for the Medicare B portion in 2027 is $209.50, which is higher than the $202.90 in 2026. If income is higher, some beneficiaries may also be required to pay additional fees, namely the income-related monthly adjustment amount ( IRMAA ). The Medicare B portion covers essential medical services and preventive services.
Meanwhile, according to analysis by the non-partisan health policy research organization KFF, the premiums for some prescription drug programs under Medicare D may see a slight increase in 2027.
The Social Security Bureau will send notifications to the beneficiaries regarding changes to COLA. The notifications will include detailed information about their benefits for 2027, such as the exact payment dates, amounts, and any deductions.
The institution stated that individuals who have created an “My Social Security” online account can start viewing this information from late November. Beneficiaries who do not have an online account but wish to view COLA notifications online must create an account and select paperless notification by November 18th.
SSA indicates that beneficiaries who have not registered to receive online notifications will receive a COLA notice by mail in December. These individuals should ensure that the address filed with the institution is up-to-date.
The institution stated that the premium amount for Medicare in 2027 will also be available online through the “My Social Security” messaging center starting from late November.
How to Calculate Social Security COLA
COLA is based on a specific government inflation indicator – the Consumer Price Index for urban wage earners and civil servants ( CPI-W ) – which represents the percentage increase from the third quarter of the previous year to the third quarter of the current year.
CPI-W is a subset of the Consumer Price Index, used to track the average changes in the prices of goods and services purchased by urban households.
According to the data for September released by the U.S. Bureau of Labor Statistics on Wednesday, CPI-W has risen by 3.9% in the past 12 months.
Policy makers and advocates have proposed using other indicators to replace CPI-W in calculating the annual COLA. One alternative is the chained CPI index, which takes into account changes in consumers' purchasing habits when prices rise. However, a recent analysis by AARP found that adopting this indicator would "significantly reduce welfare over time."
Others have proposed using the Elderly Consumer Price Index ( CPI-E ), which is an experimental index used to track the spending of people aged 62 and above. However, some experts argue that the growth rate of CPI-E may not necessarily be significantly faster than the current indicators used to calculate welfare increases.
In the upcoming social security reform, switching to different COLA measurement indicators is one of the changes that legislators may consider.
The president of the advocacy organization focused on expanding social security programs, Social Security Works, Nancy Altman, stated: "The future of social security will be determined by the votes in November this year, which also include the extent of the annual COLA adjustments."
