I talked with a client about the annual adjustment to social security this week – let’s take a look.

Every year, the Social Security Administration (SSA) announces an inflation adjustment for social security benefits. This allows for the retirement/disability benefits being paid to 76 million Americans to keep pace with inflation.

Last week, the SSA announced the increase for 2027 would be 3.6%. This adjustment is referred to as a “cost of living adjustment” – or COLA. The increase is mandated by law and is based on the change in the Consumer Price Index from Q3 2025 to Q3 2026. The average monthly increase will be $75; however it will of course vary by recipient.

The 3.6% increase is the largest increase since 2023. At that time, the annual adjustment was 8.7% as inflation was markedly higher post COVID stimulus. Last year’s increase was 2.8%.

The COLA adjustment also impacts other items related to social security. For those still working, the maximum amount of earnings subject to social security taxes is increased to $192,300. If you are claiming SS and are below retirement age, the earnings limit was increased to $25,560 ($67,920 for those that will reach FRA in 2027).

When calculating your monthly increase, be sure to apply the 3.6% increase to your gross monthly social security benefit. For many recipients, their Medicare part B premiums are netted against SS. While not yet announced, it’s anticipated that Part B premiums will also rise (and of course, Income-related Medicare adjustments may also apply)