Social Security Sets a 3.6% COLA for 2027, the Largest Since 2023, as CBO Puts the Retirement Fund Out of Money in 2032

The Social Security Administration announced on 14 October that benefits will rise 3.6% in 2027, the largest cost-of-living adjustment since 2023. The increase applies to about 72 million Social Security beneficiaries from January and to about 7.3 million people on Supplemental Security Income from 31 December. Counting people who get both, SSA puts the total at about 76 million Americans.

For the average retired worker, the monthly check goes from $2,095 to $2,170, a rise of $75. An aged couple both receiving benefits goes from $3,238 to $3,355. The SSI federal payment standard rises from $994 to $1,029 a month for an individual and from $1,491 to $1,544 for a couple.

The 2026 adjustment was 2.8%. The 2025 one was 2.5%, and 2024’s was 3.2%. You have to go back to the 8.7% of 2023, set after the inflation surge of 2022, to find a bigger one.

Gasoline wrote most of the raise

The COLA follows a fixed formula. SSA compares the average consumer price index for urban wage earners and clerical workers (CPI-W) in July, August and September with the same quarter a year earlier. This year’s third-quarter average was 328.746, against 317.265 in 2025. That’s the 3.6%.

The September inflation report, released the same morning, shows where it came from. Consumer prices rose 3.7% over the year and 0.6% in September alone. Energy prices were up 20.4% on the year and gasoline 34.2%, with a 9.1% jump in September. Core inflation, which leaves out food and energy, was 2.6%.

That gap is the war with Iran. US and Israeli strikes began on 28 February, and fighting around the Strait of Hormuz has kept oil and fuel prices high since. Retirees will get a bigger check because filling a tank costs more. Prices outside energy rose much less, so for a household that drives little, the raise runs ahead of what it pays.

Federal retirees get the same figure, with one catch. Civil Service Retirement System annuitants get the full 3.6%. Under the rules for the newer Federal Employees Retirement System, a COLA above 3% is cut by one percentage point, so FERS retirees get 2.6%.

What else changes in January

Workers pay Social Security tax on more of their wages. The taxable maximum rises from $184,500 to $192,300, an increase of 4.2%, since it follows average wages instead of prices.

The earnings test loosens too. Beneficiaries under full retirement age can earn $25,560 in 2027 before SSA withholds $1 for every $2 above the limit, up from $24,480. In the year a worker reaches full retirement age, the limit is $67,920, with $1 withheld for every $3. The maximum benefit for a worker retiring at full retirement age rises from $4,152 to $4,188 a month.

Part of the raise will go straight back to Medicare. The Part B premium is deducted from most Social Security checks, and the Centers for Medicare and Medicaid Services hasn’t announced the 2027 figure yet. The standard premium is $202.90 a month in 2026. The Medicare trustees projected $209.50 for 2027. That would take $6.60 of the average retiree’s $75. The premium is due this autumn, alongside the first negotiated Part B drug prices.

A bigger check from a fund with six years left

A higher COLA costs the trust funds more, and they are already short.

On 17 September the Congressional Budget Office published its 2026 long-term projections for Social Security. It expects the Old-Age and Survivors Insurance Trust Fund, which pays retirement and survivor benefits, to be exhausted in fiscal 2032. If the retirement and disability funds were combined, CBO’s tables put exhaustion in 2033. At that point incoming payroll taxes would cover about 74% of scheduled benefits, so checks would fall by about 26%.

Over 75 years CBO puts the shortfall at 4.57% of taxable payroll. In plain terms, closing it today would take a payroll tax rise of about four and a half points, benefit cuts worth the same, or some mix of the two.

The trustees, who report each June, are a little more hopeful. They also put the retirement fund’s exhaustion in 2032 but the combined funds in 2034, with a 22% cut. The two sets of numbers differ at the edges and agree on the main point. Both are covered in our post on CBO’s long-term budget outlook.

Under current law the cut is automatic. The trust fund can only pay what it holds, and Congress has passed no plan in either chamber to close the gap. Every COLA raises the benefit base from which a 2032 or 2033 cut would be taken.

The 2027 raise is certain. The cut is a projection six years out. The people who get the first are the ones exposed to the second, and the Congress elected on 3 November will have to start choosing how to pay. The lame-duck agenda has no Social Security item on it.