Here's How the 2027 Social Security Cost-of-Living Adjustment (COLA) Stacks Up Against 2024, 2025, and 2026

Every year, millions of Social Security recipients look forward to the annual cost-of-living adjustment, or COLA. The annual pay bump is designed to help retirees and disability beneficiaries keep up with rising prices. Each of the past three years has provided Social Security beneficiaries with pay increases of at least 2.5%. In 2027, the bump will be 3.6%.

Here's how the 2027 COLA stacks up and what it means for retirees.

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Social Security is set for another supersized COLA

The annual COLA is calculated based on a measure of inflation known as the CPI-W. The CPI-W measures changes in the cost of a basket of goods that reflects the spending patterns of all urban wage earners and clerical workers. The Social Security Administration takes the year-over-year increase in the CPI-W for each month in the third quarter (July, August, and September) and averages them to determine the COLA for the next year.

The table shows the annual COLA for the last three years and 2027.

Data source: Social Security Administration. Table by author.

The 2024 COLA came at the tail end of the high inflation rates the country saw post-COVID. Inflation rates steadily improved throughout 2023 as the Federal Reserve kept interest rates high to try to keep inflation at bay. It made progress in 2024, resulting in lower inflation rates and confidence that it could cut interest rates. Inflation reared its ugly head again last year, though, as the new administration implemented tariffs that drove up the costs of many items by the third quarter.

That problem worsened in 2026, as tariffs continued to push prices higher and the war in Iran disrupted energy supplies, sending oil prices (and, by extension, the price of almost everything else) skyrocketing. As a result, inflation remained high, pushing the Fed to reverse course on its rate-cutting plans.

While retirees are in line for a bigger pay bump than in previous years, a big COLA is a double-edged sword. It means Social Security beneficiaries suffered through higher prices while their benefits didn't keep up. That's a challenging situation for retirees heavily dependent on their benefits to make ends meet. The COLA, which is applied to payments received starting in January, should be a welcome relief.

Most retirees should be hoping for slow, steady inflation going forward. Not only is that a sign of a healthy economy, but it will make it easier to absorb higher prices while waiting for next year's COLA.

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