Your Social Security check will rise an average of $75 a month - will it be able to keep up with inflation?

By Jessica Hall

The 3.6% COLA for 2027 is aimed at helping more than 68 million beneficiaries keep pace with the cost of living

The new COLA will go into effect in January.

The Social Security cost-of-living adjustment will be 3.6% in 2027, up from 2.8% this year, as older people grapple with higher costs for healthcare, housing and groceries.

This increase, known as the COLA, will add about $75 to the average Social Security beneficiary's monthly check. The average retirement benefit was about $2,087 a month as of August, according to the Social Security Administration.

"It's a nice increase. It's not the greatest we've ever seen, but for a couple, it's an average of $150 a month. That's a step in the right direction," Mike Lynch, managing director of applied insights at the Hartford Funds, told MarketWatch. "It's a wake-up call about inflation. It's a cost-of-living increase, but what's going on behind the scenes with gas prices and everyday expenses being higher?"

The 2027 COLA is higher than the average increase of 2.6% seen over the last 20 years. The jump, which will go into effect in January, is also the largest increase since 2023.

The COLA is not a raise, but rather an adjustment to help more than 68 million Social Security beneficiaries keep pace with inflation.

Social Security is crucial to the finances of older adults, with 40% of beneficiaries age 65 and older getting at least half of their income from the program, according to the Social Security Administration. Almost 15% rely on those payments for at least 90% of their income, the agency said.

"The annual COLA protects beneficiaries from inflation, helping to ensure that people do not fall into poverty as they age. The COLA is one of the most important features of Social Security. You can't get an inflation-adjusted annuity like that on the private market," said Kathleen Romig, director of Social Security and disability policy at the Center on Budget and Policy Priorities, a progressive think tank.

"Social Security's inflation protection is really valuable. Without the COLA, today's 90-year-olds would get only about half as much in Social Security as they get today," Romig said. "The COLA is especially important in times of high inflation. This year's COLA is bigger than in many recent years because of rising prices."

The COLA announcement comes on the same day that the Bureau of Labor Statistics reported an uptick in consumer prices, which could lead to an increase in interest rates.

"There's a lot on the line financially right now for older Americans: one in five have no retirement savings, and more people feel financially insecure this year than last. That makes Social Security's cost-of-living adjustment (COLA) critically important. It helps millions of Americans keep up with rising costs for groceries, routine bills, health care and other everyday expenses," AARP's chief executive, Myechia Minter-Jordan, said in a statement.

The COLA is determined by using the consumer-price index for urban wage earners and clerical workers, known as CPI-W. That index more heavily weights costs for urban nonretirees, such as transportation, food and clothing. Some legislators have proposed instead using a different index, the CPI-E, which focuses on costs faced by the elderly, such as healthcare, housing, utilities and insurance expenses.

"The average consumer may tell you that COLA doesn't feel like enough, but it's designed to help keep pace with inflation," said Dan Stein, branch manager for Charles Schwab in Northern Virginia. "COLA is supposed to help relieve the pressure."

The maximum amount of earnings subject to the Social Security tax - known as the taxable maximum - will increase in 2027 to $192,300 from the current $184,500, according to the Social Security Administration. This maximum is adjusted along with the COLA every year.

Social Security itself faces a funding crisis. In 2032, benefits will be cut by 26%, according to the Congressional Budget Office, the nonpartisan federal agency that provides Congress with independent analysis of budgetary and economic issues. The Social Security trustees projected in June that benefits would be cut by 22%. The cuts will be automatic unless Congress acts to strengthen the system.

Stein said it's difficult to predict what Congress may do as 2032 approaches, so people preparing for retirement need to save and budget wisely.

"It's tough to forecast. In pre-retirement, it's important to plan for the unexpected," Stein said. "There are a lot of levers that can be pulled [to save Social Security], and none of them will be popular."

The 2027 COLA will be partly offset by an expected increase in the Medicare Part B premium, which is directly deducted from Social Security checks. The Part B monthly premium is projected to be $209.50 in 2027, according to the Medicare trustees report. In 2026, the premium was $202.90 per month.

The Trump administration recently sent $90 checks to 20.8 million middle-class older adults, characterizing the payment as a way to help offset the expected Medicare premium increase. People who have Medicare Advantage, the private health insurance alternative to traditional Medicare, were not eligible for the checks. Seniors who receive premium assistance from Medicaid and higher-income older adults who pay an income-related monthly adjustment amount (IRMAA) were also not eligible.

-Jessica Hall

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10-14-26 1220ET