Social Security's 2027 Cost-of-Living Adjustment (COLA) Is 3.6%. Here's How That Compares With Today's Best High-Yield Savings Rates.

It's official. Beginning in January of the year ahead, current Social Security beneficiaries' payments will be 3.6% bigger than they are right now. This should raise the typical retiree's monthly benefit of just over $2,033 by about $75, reflecting the inflation of prices that consumers have faced over the past 12 months. That's the biggest cost-of-living adjustment, or COLA, since 2022's 8.7%, after several years of below-average inflation were finally unwound by measures meant to curb the economic impact of the COVID-19 pandemic.

But how does this number stack up with the prevailing interest rates that retirees might plug their cash into?

Better than your typical brick-and-mortar bank

It's not exactly something investors of any age want to worry about. The fact is, however, in this economic environment, every earnable dollar matters. While 2027's COLA is fair enough in the sense that it's based on one of the Bureau of Labor Statistics' key measures of real inflation, somehow it doesn't feel like enough to cover Social Security beneficiaries' actual increases in cost of living.

And maybe it isn't. The BLS's Consumer Price Index for Urban Wage Earners and Clerical Workers (or CPI-W), which is used to determine Social Security's annual COLA, is somewhat different from the Consumer Price Index for the Elderly (or CPI-E), which specifically tracks the average changes in the cost of living for Americans aged 62 and up. While usually similar by most measures, the CPI-E often points to significantly higher healthcare expenses than those paid by the typical American worker.

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Ergo, anyone currently receiving Social Security benefits will likely want to make the most of these cash payments. This means immediately putting them to work in something that's flexible and liquid, but also in something with a decent yield. Checking accounts and most banks' savings accounts offer the former, but usually not the latter. For higher yields, you'll want to look at a typical brokerage firm's money market funds or an online bank's savings account options, both of which are usually bigger than what your local brick-and-mortar bank branch is able to offer.

Take SoFi Technologies' current savings account offering as an example. It's paying out 4.2% right now, in line with E*TRADE from Morgan Stanley's current yield on your cash. Go2bank offers an annualized yield of up to 4.5% on up to $5,000 right now, while Axos ONE is offering up to 5% for up to six months for new customers.

Plan for different logistics

Read all the fine print, of course, and consider your flexibility needs as well. Unlike with your local bank's checking accounts, there may be at least a one-day turnaround time to turn money held in these online savings accounts into actual spendable cash you can hold in your hand or write checks on (although moving money around between accounts can usually be handled entirely online in just one day).

On the other hand, given most households' need to make the very most of their idle cash right now, the few hundred bucks this sort of maneuvering might add to your annual cash flow can be well worth it.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.