Social Security checks will increase by approximately $76 per month for the average retired worker in 2027, as announced by the federal government on Wednesday. This increase is due to the Social Security Administration's annual cost-of-living adjustment (COLA), which has been determined each fall for decades. The adjustment for next year is set at 3.6%, based on inflation data, amounting to a total increase of over $900 for the year.
Bill Sweeney, senior vice president for government affairs at AARP, stated, "The COLA is really one of the only things in most people's retirement portfolios that is inflation-adjusted. That really means that Social Security becomes an increasingly important part of your retirement portfolio as you get older."
Individuals aged 62 or older, as well as those with disabilities or blindness, are eligible to receive Social Security benefits. Dependents or surviving spouses of deceased individuals may also collect payments.
Experts have noted that the 3.6% COLA is the highest since 2023, when payments increased by 8.7% from the previous year's 5.9% increase. The COLA is calculated using a mathematical formula tied to consumer prices. For over 50 years, Social Security beneficiaries have received annual adjustments to keep pace with inflation. When inflation is low, COLAs are smaller; conversely, when inflation rises, as it has intermittently over the past six years, the COLAs can be larger.
Shai Akabas, vice president for economic policy at the Bipartisan Policy Center, remarked that next year's adjustment is "not wildly outside of the norm," explaining that inflation has remained above the Federal Reserve's target of 2% year-over-year since 2021, leading to generally higher COLAs.
The Bureau of Labor Statistics calculates the adjustment by determining the percent change between the average consumer price index for workers from July through September of the current year compared to the same period in the previous year. If the percent change is negative, no adjustment is made for the following year.
Due to the volatility of inflation across different sectors, predicting the impact of the COLA when it takes effect in January may be challenging. Akabas noted that the adjustment is not intended to be a perfect solution but rather an approximation that must be integrated into millions of benefit payments.
Sweeney emphasized that the 3.6% increase represents "a significant amount of money," but acknowledged that rising costs can still make it difficult for consumers to manage their expenses. An AARP poll of approximately 1,000 adults aged 50 and older revealed that 76% of respondents believe a projected increase of 3.5% would not suffice to keep up with rising prices, including 80% of Social Security recipients.
Furthermore, about 70% of older adults indicated that an increase between 5% and 8% would be "sufficient" to help Social Security recipients manage their expenses, a figure that has remained consistent over the past three years of AARP polling.
Mary Johnson, an independent Social Security and Medicare policy analyst, noted that older Americans tend to lose purchasing power over time, partly because they spend more on healthcare than younger individuals. The COLA is based on costs for urban wage earners, which do not account for the spending patterns of retirees. In 2020, individuals aged 65 and older spent nearly 2.5 times more on healthcare than working-age individuals, according to government data.
Next year's COLA may also be impacted by an increase in Medicare Part B premiums, which did not occur when Social Security recipients received a significant COLA in 2023. Akabas mentioned that recent estimates suggest premium increases will likely be less than $20 per month.
The effect of the Social Security payment increase will vary by household, as rising gas prices may lead to different experiences for those who drive frequently compared to those who do not. Akabas noted that even within the older population, spending patterns can differ significantly.
Johnson tracked her budget in 2025 and 2026 and observed spending increases that exceeded 3.5% across various categories, including medical and dental insurance, electricity, groceries, and property taxes.
There is ongoing debate regarding potential changes to the formula used by the Social Security Administration for calculating COLAs, but finding a universally applicable solution may be challenging. Akabas stated, "It's difficult to create one cost-of-living index that applies to everybody in a group as diverse and large as Social Security beneficiaries."