Social Security COLA hits 3.6% for 76 million recipients in 2027

The Social Security Administration's announcement of a 3.6% cost-of-living adjustment sets the stage for the largest rise in monthly payments for retirement and disability recipients in four years. The adjustment applies to 76 million beneficiaries and is calculated using the Consumer Price Index for the July-through-September quarter.

This change will increase the average retiree's benefits by $75 a month, or $900 a year. The agency also reported that the cutoff for Social Security taxes will rise to $192,300 in 2027, up from $184,500 this year. Income above this threshold is not subject to payroll tax.

By statute, the adjustment is determined by the year-over-year change in CPI for the third quarter, making the September data released this morning the final input for the calculation. The higher nominal income is expected to act as a mild fiscal stimulus in January, though it accelerates the program's fiscal challenges. The Social Security trust fund is scheduled to expire in six years. The Committee for a Responsible Federal Budget notes that recent projections from program trustees assumed a 0.9 percentage point lower COLA for 2027.