What Does the 3.6% Social Security COLA Mean for Your 2027 Budget?
By: Will Ducharme
What was announced?
On October 14, the Social Security Administration announced a 3.6% cost-of-living adjustment (COLA) for 2027. It applies to about 72 million Social Security beneficiaries starting with January 2027 payments. SSI recipients will see the increase on December 31, 2026.
For the average retired worker, that is roughly $75 more per month, from about $2,095 to $2,170. It is the largest COLA since 2023 and well above this year's 2.8%.
The bigger raise reflects higher inflation. The COLA tracks consumer prices, and annual inflation hit 3.7% in September, driven in part by higher energy costs. In other words, the raise is meant to help you keep up, not get ahead.
When you'll see your exact number: If you have a my Social Security account, your COLA notice will be available online in late November. You need to create the account by November 18 to see it there. Everyone else will get a notice by mail in December.
How much of the raise will Medicare take?
Most retirees on Medicare have their Part B premium deducted straight from their Social Security check, so the raise you actually see will be smaller than $75.
The lowest standard Part B premium is $202.90 a month in 2026. Medicare's trustees project $209.50 for 2027, an increase of $6.60. Some private forecasters expect it to land higher, around $216 to $219, because the trustees have underestimated before. The official figure comes out in November.
Higher-income retirees should also watch IRMAA, the surcharge on Part B and Part D premiums. Your 2027 premiums will be based on your 2025 tax return, so a large Roth conversion, home sale, or capital gain last year could push you into a higher bracket.
What does it mean for federal retirees?
Many of our Northern Virginia clients are federal retirees, and for them the 3.6% headline doesn't tell the whole story. Federal pension COLAs use the same inflation measure as Social Security, but the formula differs by retirement system:
CSRS annuitants receive the full 3.6%.
FERS annuitants receive 2.6%. When inflation is above 3%, FERS gets the inflation rate minus one percentage point.
FERS COLAs generally start at age 62. Exceptions include disability retirees, survivors, and special-provision retirees such as law enforcement and firefighters.
The FERS supplement paid before age 62 does not receive a COLA.
FERS retirees also still pay the full Part B increase. A 2.6% pension bump against a roughly 3.3% premium increase means your fixed costs may grow faster than your pension this year. Your Social Security, if you're collecting it, still gets the full 3.6%.
Still working? One more change
The maximum earnings subject to Social Security tax will rise to $192,300 in 2027, up from $184,500. If you earn above that level, expect slightly more Social Security tax withheld next year, up to about $480 more for employees.
What should you do now?
Create or log into your my Social Security account by November 18 so you can see your exact 2027 benefit in late November.
Review your Medicare coverage before December 7. Open enrollment is the time to compare drug plans and Medicare Advantage options.
Update your 2027 budget using your net increase after Part B, not the headline 3.6%.
Recheck your tax withholding on Social Security, pensions, and IRA distributions.
Plan 2026 income with IRMAA in mind. This year's income sets your 2028 Medicare premiums, which matters before any year-end Roth conversion or large sale.
Revisit your withdrawal plan. With inflation running near 3.7%, it's worth confirming your portfolio withdrawals and cash reserves still fit.
Not sure how the new numbers fit your plan? Schedule a conversation with our team and we'll walk through your 2027 income, Medicare, and tax picture together.
This article is for informational purposes only and is not tax, legal, or investment advice. Medicare premium figures for 2027 are projections until CMS announces official amounts. Please consult your advisor about your specific situation.
Securities and investment advisory services offered through LPL Enterprise (LPLE), a Registered Investment Advisor, Member FINRA/SIPC, and an affiliate of LPL Financial. LPLE and LPL Financial are not affiliated with Pillar Wealth Partners.
