Social Security Might Get a 3.8% COLA Boost in 2027, but Some Recipients May See Smaller Gains

Social Security is critical for most U.S. retirees, and about 39% of them would have incomes below the poverty line without it, according to the nonpartisan Center on Budget and Policy Priorities. Thus, whether you're collecting Social Security benefits already or are looking forward to eventually doing so, it's smart to keep an eye on developments involving the program.

Here's something to know about it, for example: Nearly every year, the benefits it distributes increase thanks to mandated cost-of-living adjustments (COLAs). That's great, as those boosts are intended to keep the buying power of recipients' monthly checks steady in the face of inflation. But the news isn't all good.

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The expected increase for 2027

The COLA for 2027 isn't due to be announced until October, and we can't know for sure yet what it will be, because it will be based on the inflation rates for July, August, and September. But experts can estimate what they expect it to be based on recent economic conditions, and the nonpartisan Senior Citizens League regularly issues forecasts. The organization recently reaffirmed its last prediction for 2027: 3.8%.

Here's some context:

Data source: Social Security Administration.

So a 3.8% increase would be 1 percentage point above the January 2026 hike, due to higher inflation this year than in 2025. According to the Social Security Administration's Monthly Statistical Snapshot, in May, the average retiree's monthly benefit was $2,083. A 3.8% boost to that would amount to about $79.

A suboptimal index costs seniors buying power

Interestingly, COLAs are not based on the best measure of inflation for seniors. By law, Social Security must use the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to calculate inflation for COLAs. That's an index based on changes in the average prices of goods and services in categories such as food, housing, and transportation, but it's based on the spending patterns of workers, which differ in meaningful ways from those of retirees.

A more appropriate measure for calculating Social Security COLAs would be the Consumer Price Index for the Elderly (CPI-E), which weights categories such as healthcare expenses and housing more heavily in its formula. Healthcare costs tend to grow more rapidly than many other types of expenses, so retirees who spend a greater share of their money on medical-related expenses are likely to see their benefits lose some purchasing power.

In short, they may get annual Social Security benefit increases -- but those increases may not keep up with the increases in their actual living expenses.

Meanwhile, most retirees will gain a bit less than expected from the upcoming COLA because of Medicare.

Medicare faces inflation, too

Millions of Social Security recipients have their monthly Medicare premiums automatically deducted from their benefits. That can be very handy.

But those premiums go up nearly every year, too.

The Medicare Trustees report for 2026 projects that the $202.90 monthly Part B premium for 2026 will rise by 3.25% to $209.50 for 2027. That's an increase of $6.60 per month -- not as bad as in 2026, when the Medicare premium hike ate up about a third of the Social Security COLA.

The outlook down the road looks worse, because the Medicare Trustees project a 7.2% increase in Part B premiums for 2028 -- and a 6.2% increase in 2029.

The takeaway here is to not expect too much from Social Security. Most of us will need to save and invest with the goal of building a nest egg substantial enough to support us in retirement, regardless of what happens with the government's pension benefit program.

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