A 3.6% Social Security COLA Sounds Like Good News. Here’s the Blow Retirees Won’t See Coming
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
When the Social Security Administration announced last year that benefits would be getting a 2.8% COLA for 2026, many seniors weren’t happy. This year’s COLA announcement went differently.
The 2027 Social Security COLA has been locked in at 3.6%, and that’s a much more generous raise for seniors to look forward to. It also means the typical Social Security recipient should see a roughly $75 boost to their monthly checks starting in January.
But while a 3.6% Social Security COLA might seem like good news initially, there’s a big drawback seniors should know about.
Larger COLAs mean more rampant inflation
Social Security COLAs are designed to help benefits keep pace with inflation. They’re measured by year-over-year changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers.
The larger any given COLA is, the more inflation has been pounding consumers. And seniors on Social Security often bear the brunt of it, largely because they tend to spend a lot on healthcare, which tends to rise faster than inflation.
Not only is a 3.6% Social Security COLA an indication of problematic inflation, but it also does not guarantee that benefits will be able to keep up with inflation in the new year.
Social Security COLAs are backward-facing. They’re based on previous inflation readings, not current or future ones.
In other words, a 3.6% COLA reflects what inflation looked like during the months of July, August, and September. It doesn’t tell us what inflation will look like in the coming year. If inflation picks up even more, to the point where it’s up 4% year over year, seniors’ 3.6% COLA will be rendered fairly useless.
Of course, that’s not guaranteed to happen. But it happened in 2026.
Seniors saw their benefits increase 2.8% at the start of the year, and inflation began surging shortly after in the wake of the Middle East conflict. So it’s hard to know what the new year has in store as far as costs go.
Don’t bank on a 3.6% COLA too heavily
If you’re on Social Security, you may be hoping that your 3.6% COLA improves your buying power and makes your financial situation better. In reality, that raise may have a limited impact.
If you’re looking to improve your finances, you’re better off taking matters into your own hands. You could consider getting a job and using the money to supplement your Social Security checks. If a steady part-time job doesn’t appeal to you, join the gig economy and work when it’s convenient. That could mean a few evenings a week or select weekends when you aren’t busy.
If you don’t want to work or can’t manage a job but own a home with a separate area, such as a finished basement or garage, renting that space out may be feasible, allowing you to boost your income.
It’s natural to be happy about a larger Social Security COLA. Just recognize that your raise not only comes at the expense of higher prices, but that it’s not guaranteed to hold up well if prices keep soaring.
Contact [email protected] for any questions or corrections.
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.
