Average Social Security Check Rises by $75 in 2027, but Inflation Could Still Take a Bite
A bigger Social Security check sounds like a win, yet the formula behind it may overlook the costs retirees feel most. Discover why next year's raise could fall short and what you can do to protect your budget.
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There are millions of Americans who collect monthly benefits from Social Security. And many of those people will continue to receive benefits for years, which is why cost-of-living adjustments (COLAs) are crucial to the program.
The purpose of Social Security COLAs is to ensure that benefits are able to keep up with inflation. And the good news is that the Social Security Administration (SSA) has announced a 3.6% COLA for 2027, which translates to an average increase of approximately $75 per month for retired workers. The adjustment will take effect in January, providing higher payments to retirees who need it.
But while the upcoming COLA should help Social Security recipients keep up with rising costs, persistent inflation could quickly diminish its purchasing power. The 2027 COLA is also an important reminder that the current formula does not necessarily reflect the cost increases retirees actually experience, since their household budgets often differ from those of working-age Americans.
Social Security benefits are going up, but that’s not enough
The upcoming 3.6% Social Security COLA will increase the average monthly retirement benefit by approximately $75, bringing it from roughly $2,095 to $2,170, according to the SSA. However, the $75 figure is an average.
Because COLAs are calculated as a percentage of existing benefits, people receiving larger monthly checks will generally receive a larger dollar increase. Those with smaller benefits will receive less.
Regardless of benefit size, though, a flaw in the COLA formula could render next year’s raise less effective. And seniors who rely heavily on Social Security are the ones who stand to get hurt the most.
Social Security COLAs are determined using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a government inflation measure maintained by the Bureau of Labor Statistics. The SSA compares third-quarter CPI-W figures with those from the previous year to determine whether benefits need an adjustment.
However, the CPI-W does not necessarily capture the spending patterns of older Americans, particularly those who devote a substantial portion of their income to healthcare and housing. The nonpartisan Senior Citizens League says Social Security benefits have lost 13.7% of their buying power over the past 10 years due to this flawed system of calculating COLAs.
Inflation could continue to soar
The 3.6% COLA the SSA recently announced for 2027 is based on inflation levels over the summer. But that doesn’t guarantee that inflation won’t pick up even more in the new year. If costs start to rise at an even faster pace, that COLA could end up trailing.
Ultimately, the 2027 COLA offers some additional financial breathing room for retirees. But it does not guarantee that Social Security recipients will be able to afford everything they could a year earlier.
If you’re worried your upcoming COLA won’t stand up well to inflation, take steps to boost your income on your own. Working even a few hours per week in the gig economy could supplement your monthly Social Security checks nicely and make it easier to keep up with rising costs. And if you’re willing to commit to a part-time job on a preset schedule, you may find that the stability of that extra income helps even more.
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Maurie Backman has more than a decade of experience writing about financial topics, including retirement, investing, Social Security, and real estate. Her work has appeared on sites that include The Motley Fool, USA Today, U.S. News & World Report, The Washington Post, and Kiplinger.
Prior to becoming a full-time financial writer, Maurie worked in the financial industry trading distressed debt. She then changed course and spent a few years designing electronic toys. After a stint in content marketing and UX, she shifted back into writing and has since covered everything from the housing market to estate planning to Medicare.
When she's not busy writing, Maurie can be found hiking, walking her dogs, driving her kids to their various sports practices and games, and curling up with a good book. She cooks on occasion and bakes way too often.
