Why a Bigger 2027 Social Security COLA Might Still Feel Like a Pay Cut for Millions of Retirees

If you weren't happy with the 2.8% cost-of-living adjustment (COLA) Social Security benefits received earlier this year, here's a smidge of good news. The 2027 COLA is shaping up to be much larger.

While it's too soon to have an exact number, current estimates put the upcoming COLA in the 3.5% to 3.6% range. For the average monthly Social Security benefit today, that could amount to a boost of about $73 to $75 per month.

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But even if the 2027 COLA ends up being generous, it still might feel like a loss to millions of Social Security recipients. Here's why.

A Medicare Part B hike could get in the way

Seniors who are enrolled in both Social Security and Medicare pay for Part B out of their monthly benefits. So when there's an increase in the cost of Part B, COLAs get whittled down.

Just as we don't have an official 2027 COLA just yet, we also don't know how much Part B is set to increase each month in the new year. But in 2026, the standard monthly Part B premium rose by $17.90. Even if next year's increase isn't nearly as large, it could still have an impact.

A flawed formula might cause a giant COLA to still trail inflation

Part B hikes aside, the 2027 COLA might let Social Security recipients down because that's just what COLAs tend to do. The problem is that they're based on an index that doesn't capture the costs seniors face.

Social Security COLAs are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). But the CPI-W measures how workers spend, not retirees.

Social Security recipients, by nature, tend to spend a lot of their money on healthcare, which has outpaced inflation broadly in recent years. The current COLA formula doesn't account for that, which explains why Social Security benefits have lost 13.7% of their buying power over the past 10 years, according to the Senior Citizens League.

Of course, a formula change could make COLAs more effective in the future. But whether lawmakers will implement one is up in the air.

Right now, lawmakers are tasked with preventing potential Social Security cuts. Changing the COLA formula to allow for more generous raises is something that may have to sit on the back burner until the broader issue is resolved.

All told, the upcoming Social Security COLA could be substantial. But that doesn't mean seniors are going to get ahead financially. It's important to have realistic expectations going into 2027 so you can plan and budget accordingly.

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