Social Security checks will increase by roughly $76 per month for the average retired worker in 2027, the federal government announced Wednesday.
The payment jump is due to the Social Security Administration’s annual COLA, or cost-of-living adjustment, which has been determined each fall for decades. Next year’s increase is 3.6%, based on inflation data, amounting to a little more than $900 next year.
“The COLA is really one of the only things in most people’s retirement portfolios that is inflation-adjusted,” said Bill Sweeney, senior vice president for government affairs at AARP. “That really means that Social Security becomes an increasingly important part of your retirement portfolio as you get older.”
People 62 or older and those with a disability or blindness can receive Social Security benefits. Some dependents or surviving spouses of people who have died can also collect payments.
Here’s what experts say Social Security beneficiaries need to know about the cost-of-living adjustment for 2027.
What is the COLA and how is it calculated?
Next year’s cost-of-living adjustment of 3.6% is the highest since 2023, when payments increased 8.7% from the prior year’s already higher 5.9% jump.
The COLA is a mathematical formula tied to consumer prices. For more than 50 years, Social Security beneficiaries have gotten annual adjustments to keep up with inflation. If inflation is low, so too are COLAs, but when inflation spikes, as it has on-and-off for the past six years, the COLAs can be big jumps.
Next year’s adjustment is “not wildly outside of the norm,” said Shai Akabas, vice president for economic policy at the Bipartisan Policy Center. Because inflation has remained above the Federal Reserve’s target of 2% year over year since 2021, COLAs have generally also been higher than that, he said.
The Bureau of Labor Statistics calculates the adjustment by finding the percent change between the average consumer price index for workers for July through September of the current year and the same figure for the previous year. If the percent change is negative, there’s no adjustment for the following year.
Because inflation has been so volatile sector by sector, it may be hard to predict what a COLA will feel like when it takes effect in January, Akabas said.
But the adjustment isn’t necessarily meant to be a perfect fix.
“It’s meant to be as close to an approximation and current a measure as can be done,” Akabas said, that then “needs to be incorporated into millions and millions of benefit payments and be communicated throughout the system.”
What does next year’s COLA mean for people who receive Social Security?
The 3.6% increase is “a significant amount of money,” Sweeney said. But with rising costs, it can still be hard for consumers to keep up, he said.
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An AARP poll of some 1,000 adults aged 50 and older found that 76% of respondents said a projected increase of 3.5% would not be enough to keep up with rising prices. That includes 80% of Social Security recipients.
Instead, about 7 in 10 of older adults said an increase between 5% and 8% would be “sufficient” to help Social Security recipients afford expenses — a number that has remained relatively consistent over the past three years AARP has conducted its poll.
Over time, older Americans lose buying power, said Mary Johnson, an independent Social Security and Medicare policy analyst who receives benefits herself.
That’s partly because older adults spend more on healthcare than younger adults, while the COLA is based on the costs of urban wage earners, which does not include retired people. People 65 and older spent nearly 2.5 times the amount working-age people spent on healthcare in 2020, according to the government.
Next year’s COLA may also be undercut by a rise in Medicare Part B premiums, which wasn’t the case when Social Security recipients got a huge COLA in 2023. That could take a bite out of people’s COLA increases, Akabas said, though recent estimates put premium increases at probably less than $20 per month, he added.
The effect of the Social Security payment increase will also vary from household to household, Akabas said. Gas has remained particularly elevated recently, he added, so the COLA may overcompensate for people who use less gas and be insufficient for those who fill up more frequently.
Even within the older population, there’s spending nuance, Akabas said.
When Johnson tracked her own budget in 2025 and 2026, for example, she saw spending spikes that exceeded 3.5% in every category, including medical and dental insurance, electricity, groceries and property taxes.
There’s debate on how and whether the Social Security Administration should change its formula for calculating COLAs, but a perfect solution may be elusive.
“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,” Akabas said.
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