Key Points
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The release of the September inflation report today, Oct. 14, provided the final puzzle needed to calculate Social Security’s 2027 cost-of-living adjustment (COLA).
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Social Security’s 2027 raise is one of the largest since 1993, reflecting an inflation rate that’s well above average.
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Perhaps more importantly, tens of millions of retirees are on track for their first silver lining since 2023.
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Arguably, the most important day of the year has arrived for Social Security’s more than 71 million traditional beneficiaries. Given that most retirees rely on their Social Security income, in some capacity, to make ends meet, the annual cost-of-living adjustment (COLA) reveal is of great importance.
Put simply, Social Security’s COLA is the near-annual “raise” passed on to beneficiaries that accounts for inflation (rising prices). If, for example, a broad basket of goods and services regularly purchased by seniors increases in price by 3% from one year to the next, Social Security benefits would also need to rise by 3% to ensure no loss of buying power. Social Security’s COLA is the tool that attempts to keep benefits in line with inflation each year.
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Today, Oct. 14, at 08:30 a.m. ET, the U.S. Bureau of Labor Statistics released the September inflation report, providing the final data point needed to calculate Social Security’s 2027 COLA.
Image source: Getty Images.
Retired workers, workers with disabilities, and survivors of deceased workers are set to receive one of the largest raises since 1993. What’s more, tens of millions of retirees are on track for Social Security’s first silver lining since 2023.
It’s official: Social Security’s fifth-largest COLA in 35 years is on its way
According to the Social Security Administration, beneficiaries will see their monthly payouts climb by 3.6% in 2027. This represents a tie for the fifth-largest Social Security COLA over the last 35 years, bested only by raises of 4.1% (2006), 5.8% (2009), 5.9% (2022), and 8.7% (2023), the latter of which was the largest since 1982.
Furthermore, it’s the sixth consecutive year in which payouts have grown by at least 2.5%: 5.9% (2022), 8.7% (2023), 3.2% (2024), 2.5% (2025), 2.8% (2026), and 3.6% (2027). The last time Social Security recipients enjoyed six straight years with COLAs of at least 2.5% was from 1988 through 1997.
Based on the average payouts listed in Social Security’s August 2026 snapshot, a 3.6% COLA translates into an extra $75 per month for the typical retired-worker beneficiary in 2027. As for the average worker with a disability and the average survivor beneficiary, their monthly payouts will each rise by roughly $59 next year.
Given that Social Security’s COLA is designed to combat inflation, one of the largest raises since 1993 means the prevailing rate of inflation is also above average. Federal Reserve policymakers have homed in on three factors responsible for persistently elevated inflation and, thus, Social Security’s outsize 2027 COLA.
Firstly, policymakers have pointed to President Donald Trump’s tariff and trade policy as a source of inflation. When duties are added to imported goods used to manufacture products in the U.S., it can increase production costs, which are then passed on to consumers.
Secondly, Federal Reserve officials have singled out the Iran war as a source of higher consumer prices. The ongoing closure of the Strait of Hormuz has led to the largest energy supply disruption in modern history, sending fuel prices soaring.
Finally, Fed officials recognize that the artificial intelligence (AI) infrastructure build-out is increasing consumer prices. The combination of insatiable demand for AI hardware and persistent supply shortages for AI chips and memory has increased prices for consumers on everything from laptops to smartphones.
Yes, Social Security beneficiaries are receiving an outsize raise in 2027, but it’s designed to offset higher-than-normal inflation.
Image source: Getty Images.
Tens of millions of retirees are on track for a welcome silver lining in 2027
While today’s headlines will be focused on one of the largest Social Security raises in more than three decades, there’s an even bigger story brewing for tens of millions of retirees currently enrolled in traditional Medicare.
Traditional Medicare consists of:
- Part A: Inpatient hospital care
- Part B: Outpatient services
- Part D: Prescription drugs
Whereas Part A has no monthly premium for roughly 99% of workers, Parts B and D have a standard monthly premium. The standard Part B premium of $202.90 per month in 2026 is typically deducted from a retiree’s Social Security payout.
Part B premiums have been a consistent sore spot for the nearly 29 million retirees enrolled in traditional Medicare. In most years, the annual percentage increase in Part B premiums has vastly outpaced Social Security’s yearly COLA. For instance, the 3.2%, 2.5%, and 2.8% respective COLAs passed on to beneficiaries from 2024 to 2026 were met by Medicare Part B premium hikes of 5.9% (2024), 5.9% (2025), and 9.7% (2026).
When annual increases to the Part B premium are notably higher than Social Security’s COLA, it can offset some or all of a beneficiary’s raise.
But here’s where the aforementioned silver lining comes into play for these individuals. According to the 2026 Medicare Trustees Report, the projected increase in the monthly Part B premium for 2027 is just $6.60, or 3.25%, to $209.50. If this estimate proves accurate, it would mark the first time since 2023 that Social Security’s COLA (3.6%) will be larger than the increase in Medicare’s Part B premium (3.25%).
For the tens of millions of retirees enrolled in traditional Medicare, it means the odds have risen that they’ll be able to retain more of next year’s COLA, as opposed to losing it to a higher monthly Part B premium. That’s a silver lining to celebrate.
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