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The Social Security Administration announced a 3.6% cost of living adjustment (COLA) for 2027 on Wednesday.
The COLA is determined using data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of the year, including the months of July, August, and September. It aims to ensure that the purchasing power of social security benefits is not eroded by inflation.
On average, the COLA will increase Social Security retirement benefits by $75 per month.
“Social Security will implement this cost-of-living adjustment for 76 million Americans, providing them with greater financial stability,” said Commissioner Frank Bisignano.
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The Social Security Administration announced a COLA of 3.6% for 2027. (Jim West/UCG/Universal Images Group via Getty Images)
The COLA will come into effect for benefits paid for the month of January 2027, including old age, survivors and disability insurance (OASDI) and supplemental security income (SSI).
The 2027 COLA is the highest since 2023, when benefits received an 8.7% increase to account for the increase in CPI inflation that occurred.
As inflation has eased over the past three years, the COLA has declined accordingly to 3.2% in 2024, 2.5% in 2025, and 2.8% in 2026.
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Social Security uses an annual COLA to adjust benefits when inflation rises. (Getty Images/stock)
The COLA increase for 2027 is partly explained by rising energy prices this year, which jumped after the outbreak of the war in Iran and remained high due to disruptions in the oil and gasoline supply chain.
AARP CEO Myechia Minter-Jordan said in a statement that there are “a lot of financial risks right now for older Americans: one in five has no retirement savings, and more people feel financially insecure this year than last.”
“This makes Social Security’s cost-of-living adjustment (COLA) critically important. It helps millions of Americans cope with the rising costs of groceries, everyday bills, health care and everyday expenses,” Minter-Jordan added.
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The 2027 COLA is the largest since 2023. (Marc Félix/The Washington Post)
The nonpartisan Committee for a Responsible Federal Budget (CRFB) noted that the 3.6% COLA “will increase average benefits by about $900 per retiree, but would provide an increase of more than $2,200 for the wealthiest beneficiaries.”
“The highest-earning couples who retired this year at their normal retirement age will see a combined increase of $3,600 – enough to bring their combined benefits above $100,000 per year,” CRFB wrote.
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