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The Social Security Administration announced the increase Wednesday, saying it will affect about 73 million people receiving Social Security benefits and nearly 7.5 million people receiving Supplemental Security Income. Some people receive both types of payments.
The adjustment, commonly known as COLA, is designed to help benefits keep pace with inflation. Social Security payments will reflect the increase beginning in January 2027, while higher SSI payments are scheduled to begin Dec. 31, 2026.
But some older adults and people with disabilities say the increase will do little to ease financial pressure as the cost of necessities continues to climb.
The announcement comes weeks before the November midterm elections, putting the finances of older Americans and the future of Social Security back into focus as voters weigh the economy and household costs.
Social Security Commissioner Frank Bisignano said the adjustment would provide recipients with “greater financial stability.”
Rising prices continue to strain older Americans
For retirees living on fixed incomes, the annual adjustment can help offset increases in everyday expenses. But the benefit increase does not guarantee that recipients will gain purchasing power, particularly when costs for housing, groceries, transportation and health care rise.
Inflation accelerated in August as gasoline prices climbed amid renewed fighting between the United States and Iran. The latest price increases have added pressure to household budgets, including those of retirees who have limited opportunities to increase their income.
The 2027 adjustment is larger than the 2.8% increase recipients received in 2026. Still, its effect will vary depending on each person’s monthly benefit and how quickly their expenses rise.
The increase is calculated using a measure of inflation known as the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. The formula compares price changes during the third quarter of the current year with the same period a year earlier.
Because the formula tracks spending patterns among urban wage earners and clerical workers rather than retirees specifically, advocates have questioned whether it fully reflects the expenses older Americans face.
Social Security faces a long-term funding challenge
The benefit increase comes as Social Security faces a funding shortfall that Congress has yet to resolve.
The June 2026 trustees’ report projected that Social Security’s combined trust funds, which support retirement and disability benefits, would be unable to pay all scheduled benefits beginning in 2034 if lawmakers do not act.
After the funds are depleted, continuing tax revenue would cover about 83% of scheduled benefits under the report’s projections. That would not mean Social Security would stop paying benefits altogether, but recipients could face across-the-board reductions if Congress does not change the program’s finances.
The outlook has renewed calls for lawmakers to address the system’s long-term funding needs without reducing benefits for current or future retirees.
In June, Sens. Elizabeth Warren, D-Mass., and Bernie Moreno, R-Ohio, proposed lifting the cap on earnings subject to Social Security payroll taxes. Under current rules, wages above an annual threshold are not subject to the Social Security portion of the payroll tax.
The taxable maximum is scheduled to rise to $192,300 in 2027, up from $184,500 in 2026.
Warren and Moreno argued in an opinion article in The New York Times that applying the payroll tax to more earnings could generate substantial revenue and extend the program’s solvency.
The proposal reflects a broader debate over whether Social Security’s funding gap should be addressed primarily through higher revenue, benefit changes or a combination of measures.
The Peter G. Peterson Foundation estimates that eliminating the payroll tax cap could bring roughly $3 trillion into the program over a decade. The proposal remains politically contentious, particularly among Republicans who have traditionally opposed tax increases on higher-income earners.
Recent policy changes affect benefits and taxes
Changes enacted under both the Trump and Biden administrations have altered how some older Americans receive benefits or pay taxes, while leaving the broader funding challenge unresolved.
President Donald Trump’s tax and spending legislation created a temporary tax deduction for people 65 and older. The deduction applies to qualifying income beyond Social Security benefits, but it does not benefit everyone equally. Older adults who do not owe federal income tax may receive little or no additional benefit from the deduction, while eligibility limits restrict its availability to some higher-income taxpayers.
Former President Joe Biden signed legislation in 2025 repealing the Windfall Elimination Provision and Government Pension Offset. Those provisions had reduced Social Security payments for certain people with pensions from work not covered by Social Security, including many former public employees and some spouses or surviving spouses.
The repeal increased benefits for roughly 2.8 million people, according to previous reporting by The Associated Press.
Although these changes have affected individual recipients, they have not eliminated the need for a broader agreement on Social Security’s long-term finances.
What recipients should know about the 2027 increase
The 3.6% adjustment will be applied to eligible Social Security benefits and SSI payments according to the program’s rules. The average $75 monthly increase is an estimate, not a guaranteed amount for every recipient.
Actual increases will depend on each person’s current benefit. Changes in Medicare premiums, taxes and other deductions can also affect how much money beneficiaries ultimately have available.
The increase will provide additional income to millions of retirees and people with disabilities, but its practical impact will depend on whether it keeps pace with their individual expenses.
Meanwhile, Congress faces continued pressure to address Social Security’s projected funding shortfall before the trust funds can no longer cover all scheduled payments. Without legislative action, the system’s incoming revenue would be insufficient to pay the full benefits currently promised after the projected depletion date.
