Social Security announces 3.6% cost-of-living adjustment for 2027

The Social Security Administration announced on October 14, 2026, that 76 million recipients will receive a 3.6% cost-of-living adjustment in 2027, raising the average retired worker's benefit by $75 to $2,170 monthly. The maximum taxable wage cap will also rise 4.2% to $192,300. While the bump offers relief, senior advocacy groups argue the underlying CPI-W index fails to account for medical costs, fueling legislative proposals for alternative measures like the CPI-E as a 2032 trust fund depletion deadline looms.

Details of the 2027 Social Security COLA

• ▪The 2027 Social Security COLA increase of 3.6% is the highest annual percentage adjustment since 2023
• ▪Increased payments for approximately 7.3 million Supplemental Security Income recipients will begin on December 31, 2026
• ▪The Social Security Administration announced on October 14, 2026 that Social Security benefits will increase by 3.6% for 2027

Concerns regarding COLA calculation and adequacy

• ▪The Senior Citizens League calculated that Social Security payments lost approximately 14% of their purchasing power relative to actual inflation between 2010 and 2026
• ▪The annual Social Security cost-of-living adjustment is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the current year compared to the third quarter of the previous year
• ▪An AARP poll of 1,023 adults aged 50 and older found that 76% viewed a projected 3.5% cost-of-living adjustment as inadequate to cover rising expenses
• ▪Advocates argue the CPI-W is unsuitable for retirees because older households spend a larger proportion of their income on healthcare and housing than working-age wage earners

Legislative proposals to adopt CPI-E

• ▪Senator Bernie Sanders introduced the Social Security Expansion Act in February 2025 to replace the CPI-W with the CPI-E for Social Security cost-of-living adjustments
• ▪Social Security Administration actuaries estimated that adopting the CPI-E in December 2028 would increase annual COLAs by 0.15 percentage points on average while worsening Social Security's 75-year actuarial balance by 0.33% of taxable payroll
• ▪Representative Nikki Budzinski introduced the Boosting Benefits and COLAs for Seniors Act in October 2025 to calculate COLAs using whichever index is higher between the CPI-W and the CPI-E

Increases to the payroll tax cap

• ▪Less than 83% of total U.S. wages were subject to the Social Security payroll tax in 2026, down from nearly 90% in 1983
• ▪The Social Security Administration said the Social Security maximum salary subject to the 12.4% payroll tax will increase 4.2% from $184,500 in 2026 to $192,300 in 2027

Social Security trust fund solvency challenges

• ▪If Congress does not alter funding before the depletion of the Social Security retirement trust fund in 2032, incoming tax revenues will cover only 78% of scheduled retirement benefits
• ▪The 2026 Social Security Trustees report projects that the Old-Age and Survivors Insurance Trust Fund will exhaust its reserves in 2032
• ▪Social Security has paid out more in benefits than it collects in payroll taxes each year since 2021