As the Social Security Administration (SSA) marks the 91st anniversary of the Social Security Act, the program continues to serve as a foundation of retirement income for millions of Americans. Its annual cost-of-living adjustment (COLA) remains an important feature, helping beneficiaries maintain their purchasing power as prices change over time.

The SSA has announced a 3.6% cost-of-living adjustment for 2027.

This adjustment will affect Social Security benefits and is intended to help recipients keep pace with inflation.

See the official 2027 Social Security COLA announcement and fact sheet here.

What Does the 2027 COLA Mean for Social Security Benefits?

Beginning in January 2027, Social Security recipients will see a 3.6% increase in their monthly benefits.

For the average retired worker, this translates to approximately $75 more per month, bringing the average monthly benefit from $2,095 to $2,170, before applicable deductions.

While the annual adjustment helps offset inflation, the actual increase in a recipient's payment may vary. Changes in Medicare premiums, particularly Medicare Part B, can affect how much of the increase beneficiaries receive in their monthly payment.

Other Important Social Security Changes for 2027

In addition to the annual COLA, the SSA updates several provisions that can affect retirement planning.

Maximum taxable earnings: The maximum amount of earnings subject to Social Security payroll taxes will increase from $184,500 in 2026 to $192,300 in 2027.

Retirement Earnings Test: For individuals who receive benefits before reaching full retirement age and continue working, the annual earnings limits will also increase.

  • Under full retirement age for the entire year: The annual earnings limit will increase from $24,480 in 2026 to $25,560 in 2027.
  • Reaching full retirement age during 2027: The earnings limit for the months before reaching full retirement age will increase from $65,160 in 2026 to $67,920 in 2027.

These thresholds matter for individuals who are considering claiming Social Security while continuing to work. For those under full retirement age, Social Security withholds $1 in benefits for every $2 earned above the annual limit. In the year an individual reaches full retirement age, $1 is withheld for every $3 earned above the higher limit, but only for earnings before the month they reach full retirement age.

Once an individual reaches full retirement age, the earnings test no longer applies.

Why the COLA Matters for Retirement Income Planning

Social Security offers features that distinguish it from other retirement income sources. Benefits are adjusted for inflation, payable for life, and can provide important survivor benefits for married couples.

But Social Security's value extends beyond the monthly benefit amount. As Joe Elsasser, CFP®, discusses in his recent article, Social Security as a Singular Asset, its unique characteristics make it an important part of a coordinated retirement income strategy. 

For retirement income planners, the annual COLA announcement is an opportunity to look beyond the percentage increase and help clients understand how Social Security fits into their broader retirement strategy.

A higher monthly benefit may affect taxable income, Medicare premiums, and the amount a retiree needs to withdraw from other retirement accounts. It also reinforces the importance of evaluating Social Security claiming decisions alongside other retirement income sources.

The bigger planning question isn't simply how much Social Security benefits are increasing. It's how those benefits support a coordinated retirement income strategy over time.

Covisum Software Updates for 2027

Covisum is incorporating the 2027 Social Security COLA and updated earnings limits into our retirement planning software. These updates are expected to be available shortly.