The U.S. Social Security Administration (SSA) stated on Wednesday that the Cost-of-Living Adjustment (COLA) for Social Security in 2027 will be 3.6%.
The Cost-of-Living Adjustment, or COLA, provides an annual inflation adjustment to Social Security benefits and Supplemental Security Income (SSI) benefits.
The agency stated that average monthly Social Security retirement benefits will increase by $75.
Frank Bisignano, Administrator of the Social Security Administration, stated in a press release: "Social Security will implement this cost-of-living adjustment for 76 million Americans, providing them with greater financial stability."
According to the SSA, approximately 72 million Social Security recipients will see an increase in benefits in January. The agency stated that about 7.3 million SSI beneficiaries will receive higher payments starting December 31.
The 3.6% COLA for 2027 aligns with predictions from Social Security experts, who last month forecasted an increase between 3.5% and 3.6%.
Higher COLA occurs when inflation rises.
The 3.6% COLA in 2027 is the largest benefit increase since 2023. In 2023, beneficiaries received an 8.7% benefit increase, the highest in four decades, to address rising inflation.
The COLA for 2026 is 2.8%.
The latest government inflation data released on Wednesday showed that consumer price increases are accelerating. Over the past 12 months, the Consumer Price Index rose by 3.7%, driven largely by significant increases in gasoline prices.
According to the AARP, about 40% of Social Security beneficiaries aged 65 and older rely on the program for at least half of their income.
A recent AARP survey found that 76% of respondents said a 3.5% COLA is not enough.
AARP CEO Myechia Minter-Jordan stated in a statement that the Social Security COLA is “critical” because it helps millions of Americans cover rising everyday expenses, including groceries, regular bills, and healthcare.
Minter-Jordan said: "Currently, older Americans face significant financial risks: one in five have no retirement savings, and more people this year feel financially insecure than last year."
How to calculate your 3.6% benefit increase
Beneficiaries can estimate the increase in their 2027 benefit check by multiplying their current monthly benefit amount by 3.6%, or 0.036.
However, note that increases in Medicare Part B or Part D premiums in 2027—which may be deducted directly from benefit checks—will affect the actual monthly payment amount beneficiaries receive.
According to the Medicare Trustees Report, the standard monthly premium for Medicare Part B is projected to be $209.50 in 2027, up from $202.90 in 2026. Some beneficiaries with higher incomes may also pay an additional income-related monthly adjustment amount (IRMAA). Medicare Part B covers medically necessary services and preventive services.
Meanwhile, according to an analysis by KFF, a nonpartisan health policy research organization, premiums for the Medicare Part D prescription drug plan may rise slightly by 2027.
The Social Security Administration will send beneficiaries notification of the COLA change. The notice will include specific details about their 2027 benefits, including the exact payment date, amount, and any deductions.
The agency stated that individuals who have created a "My Social Security" online account can begin viewing this information in late November. Beneficiaries without an online account who wish to view the COLA notice online must create an account and opt for paperless notices by November 18.
SSA states that beneficiaries who have not yet registered to receive online notifications will receive a mailed COLA notice in December. These individuals should ensure that the address on file with the agency is up to date.
The agency stated that the 2027 Medicare premium amount will also be available online through the "My Social Security" message center starting in late November.
How is the Social Security COLA calculated?
COLA is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a specific government inflation metric, 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 that tracks the average change in prices of goods and services purchased by urban wage earners and clerical workers.
According to data released by the U.S. Bureau of Labor Statistics on Wednesday, the CPI-W increased by 3.9% over the past 12 months.
Policymakers and advocates have proposed using alternative metrics to CPI-W for calculating annual COLAs. One such alternative is the chained CPI, which accounts for changes in consumer purchasing habits as prices rise. However, a recent analysis by AARP found that switching to this metric would “significantly reduce benefits over time.”
Others have proposed using the Consumer Price Index for the Elderly (CPI-E), an experimental index that tracks spending by individuals aged 62 and older. However, some experts note that the CPI-E may not necessarily grow significantly faster than the current index used to calculate benefit increases.
In the upcoming Social Security reform, switching to a different COLA measure is one of the changes lawmakers may consider.
Nancy Altman, President of Social Security Works, said: “The future of Social Security will be decided on this November’s ballot, including the magnitude of the annual COLA adjustment.”