What to know about the latest Social Security cost-of-living adjustment

As anyone who buys groceries or fills up their tank has likely noticed, the cost of living has gone up in recent years. Thankfully, this year's cost of living adjustment (COLA) — the regular review by the Social Security Administration of its calculations for Social Security retirement benefits as well as Social Security Disability Insurance (SSDI) payments and Supplemental Security Income (SSI) payments — seems to be factoring that in.

Starting in 2027, "retirees and other beneficiaries will receive the largest annual cost-of-living adjustment since 2023 in their Social Security checks," said The New York Times. This "bigger increase is meant to keep pace with higher inflation this year, driven in part by soaring fuel prices sparked by the war in Iran," CBS News.

What is the COLA for 2027?

The Social Security cost of living adjustment for 2027 will be 3.6%. As a result of this adjustment, the average Social Security payment is expected to increase by $75 a month, according to the Social Security Administration. The increase will take effect in January.

The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.

Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.

Sign up

But while it is the highest it's been in four years, some experts are still skeptical the COLA will be enough, following years of persistently high inflation. "While a 3.6% COLA is certainly welcome, it wouldn't necessarily restore the purchasing power seniors have already lost," said Shannon Benton, the executive director of the advocacy group Senior Citizens League, to CBS News. "The COLAs are designed to keep pace with inflation, not make up for years of falling behind."

The 2027 COLA is "supposed to offset inflation, but it under-measures it," said Nancy Altman, the president of nonprofit advocacy organization Social Security Works, to Yahoo Finance.

How much does Social Security usually increase each year?

For context, the 2027 COLA is "well above both this year's COLA and the 2.6% average over the past two decades," said Yahoo Finance. For 2026, the COLA was just slightly above that longer-term average, at 2.8%. It is far from the biggest boost in recent years, though — in 2023, for instance, "beneficiaries received an 8.7% benefit boost — the highest in four decades — in response to rising inflation," said CNBC.

It is also worth noting that while the SSA will review the data each year to weigh a cost-of-living increase, there is "no guarantee of an increase in any given year," said the AARP. In fact, the "amount of the increase can vary greatly from year to year," ranging from 0% all the way up to 14.3% over the period since COLAs began in 1975.

How is COLA calculated?

The Social Security Administration (SSA) is responsible for calculating cost-of-living adjustments and then applying them to people's benefit payments. Its COLA calculation hinges on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is a "monthly inflation metric published by the Bureau of Labor Statistics that tracks changes in prices for common goods and services," said The Motley Fool.

To determine if a COLA is necessary and by how much, the SSA compares the CPI-W for the third quarter of the current year with the third quarter of the last year. Increases in the average CPI-W between those periods lead to an increase in benefits, while minimal or no change, or even a decrease, results in no adjustments being made.