Social Security's Trump Bump-Driven 2027 COLA Has a Rare "Bonus" for 29 Million Retirees

For Social Security's more than 55 million retired-worker beneficiaries, few announcements have more of a bearing than the annual cost-of-living adjustment (COLA) reveal.

Social Security's COLA is essentially the "raise" passed on to beneficiaries most years that accounts for inflation (rising prices). If benefits didn't increase in lockstep with inflation, Social Security income would lose purchasing power over time.

In 2027, the program's nearly 72 million traditional beneficiaries, including retired workers, will receive one of the largest raises over the last 35 years, courtesy of President Donald Trump's policies. In addition to an outsize COLA, this Trump bump is on track to provide a rare "bonus" to about 29 million retirees.

President Trump's policies have elevated inflation and, therefore, Social Security's annual raise. Image source: Official White House Photo by Joyce N. Boghosian, courtesy of the National Archives.

The fifth-largest Social Security raise since 1993 is on the way

Since Social Security began using the Consumer Price Index for Urban Wage Earners and Clerical Workers as its inflation-measuring yardstick in 1975, prices have risen in all but three years (2010, 2011, and 2016). This means an annual cost-of-living adjustment has become the expectation for beneficiaries.

On Oct. 14, the Social Security Administration announced that benefits would rise by 3.6% in 2027. This marks a tie for the fifth-largest raise since 1993, surpassed only by Social Security COLAs of 4.1% in 2006, 5.8% in 2009, 5.9% in 2022, and 8.7% in 2023, the latter of which is the biggest COLA since 1982.

The average retired worker is expected to see their monthly payout jump by $75, while the typical worker with a disability should receive an extra $59 per month in the new year.

Outsize annual COLAs don't happen by accident. They're a reflection of elevated inflation, which over the last two years has been fueled in part by President Trump's policies.

For example, Social Security's 2026 COLA of 2.8% was given a modest boost by President Trump's "Liberation Day" tariffs. Adding duties to unfinished imported goods, such as steel, can increase domestic manufacturing costs, which are then passed along to consumers.

New from the New York Fed: "By February 2026, tariffs had contributed 2.9 pp to goods price inflation, and without them goods prices would have fallen slightly." About one quarter of every point in higher tariff rates shows up in consumer prices within one year. • A 10% across-the-board tariff yields a 2.6% rise in consumer goods prices after one year. • About two thirds of the increase comes from pricier imports, which get passed through quickly. • Another third comes from U.S. made goods, as producers face higher input costs and less import competition. This takes longer, about 6-12 months, to filter through.

— Nick Timiraos (@NickTimiraos) October 6, 2026

This dynamic has continued into the second year of Trump's second term. According to a new report by three New York Federal Reserve economists writing for Liberty Street Economics ("How Fast Do Tariffs Pass Through into Consumer Prices?"), the president's 2025 tariffs increased goods price inflation by an estimated 2.9 percentage points by February 2026.

In addition to tariffs, the Trump-led Iran war is impacting consumer prices. The closure of the Strait of Hormuz represents the largest energy supply chain disruption in modern history. Gas and diesel prices skyrocketed, with the latter reaching a record high in September.

Collectively, these two policies have lifted the prevailing inflation rate, leading to one of the largest Social Security COLAs in the last 35 years.

Image source: Getty Images.

A rare bonus likely awaits select retirees in 2027

But an outsize Social Security raise may not be the only benefit on tap for a select group of retirees in 2027. For the roughly 29 million retirees enrolled in original Medicare, a rare bonus likely awaits.

Traditional Medicare is comprised of three Parts: A (inpatient hospital care), B (outpatient services), and D (prescription drugs). Whereas 99% of workers won't pay anything for Part A, Parts B and D have standard monthly premiums that can be higher for higher-income individuals. In 2026, the standard Part B premium is $202.90 per month, and it's usually taken directly from a retiree's Social Security benefit.

Throughout most of the 21st century, Medicare's Part B premium has risen at a considerably faster pace than Social Security's COLA. While retired workers saw their Social Security payouts climb by 3.2%, 2.5%, and 2.8%, respectively, from 2024 through 2026, Medicare's Part B premium jumped by 5.9% (2024), 5.9% (2025), and 9.7% (2026).

72 million Social Security beneficiaries will see a 3.6% cost-of-living adjustment (COLA) beginning in January 2027. The 26% increase in benefits over the past 5 years is the biggest 5-year increase since 1982-1986. https://t.co/jMp13XUziC

— Charlie Bilello (@charliebilello) October 15, 2026

When Part B premiums rise notably faster than Social Security's COLA, it's a recipe for retirees to hand back some or all of their annual raise.

However, the upcoming year may have a silver lining in store for these roughly 29 million retirees. According to the 2026 Medicare Trustees Report, next year's Part B premium is only estimated to rise by $6.60 per month, or 3.25%.

If accurate, this would mark the first time since 2023 that Social Security's COLA is rising by a higher percentage than Medicare's Part B premium. For original Medicare enrollees receiving a retired-worker benefit, it would mean retaining more of their annual COLA, as opposed to handing it over due to rapidly rising Part B premiums.

For tens of millions of retirees, an outsize raise and a rare bonus may await.

The Motley Fool has a disclosure policy.