Social Security's 2027 COLA ranks among the biggest since 1993

After the U.S. Bureau of Labor Statistics released the September inflation report — the final figure needed to determine Social Security's cost-of-living adjustment for the next year — the Social Security Administration said benefits would rise by 3.6% in 2027.

That increase stands out in historical terms. Since 1993, only four Social Security COLAs have been larger:

• 2006: 4.1% COLA
• 2009: 5.8% COLA
• 2022: 5.9% COLA
• 2023: 8.7% COLA (the largest since 1982)

The fifth-largest Social Security COLA in 35 years is expected to lift the average monthly benefit for retired workers by $75. Average disability beneficiaries and survivor beneficiaries are projected to see their monthly payments rise by about $59.

It also marks the sixth straight year that benefits have increased by at least 2.5%. The last comparable stretch ran from 1988 through 1997, when annual Social Security increases ranged from 2.6% to 5.4%.

72 million Social Security beneficiaries will see a 3.6% cost-of-living adjustment (COLA) beginning in January 2027. The 26% increase in benefits over the past 5 years is the biggest 5-year increase since 1982-1986. https://t.co/jMp13XUziC

— Charlie Bilello (@charliebilello)

The unusually large 2027 increase is tied to what the article describes as Trump-driven inflation. Two policy areas, in particular, pushed up inflation and therefore affected Social Security's COLA.

First, tariff and trade policy has increased consumer prices over the past two years. The president's "Liberation Day" tariffs contributed to Social Security's 2026 COLA, while temporary duties announced in February 2026 and newer tariffs under Section 301 of the Trade Act of 1974 are shaping the 2027 adjustment.

Higher tariffs make imported goods more expensive. If the imports are unfinished goods, such as steel used in U.S. manufacturing, the added cost can also flow through to domestic production and then to consumers.

The other factor cited is the Trump-led Iran war. The prolonged closure of the Strait of Hormuz has been described as a major modern energy supply disruption, sending gas and diesel prices sharply higher and helping spread inflation into the wider U.S. economy.

Why larger Social Security increases can create problems

Big monthly benefit increases are welcome, and in periods of high inflation they are necessary to help retirees keep up with rising costs.

But larger raises also come with long-term consequences for the retirement program. There is no free lunch when it comes to Social Security financing.

For more than 40 years, the annual Social Security Board of Trustees Report has warned of a long-range funding gap over 75 years. In simple terms, expected income over that period is projected to fall short of outlays, which include benefit payments, COLAs, and administrative costs.

In the most recent Trustees Report, that unfunded obligation was estimated at $29.3 trillion.

The more immediate concern is that the Old-Age and Survivors Insurance trust fund's asset reserves are projected to be depleted in the fourth quarter of 2032. This fund pays monthly benefits to retired workers and survivors of deceased workers.

The program would still keep paying benefits even if those reserves were exhausted, because Social Security is financed primarily through payroll taxes on earned income. That structure means the program cannot go bankrupt in the usual sense.

Even so, if the trust fund reserves run dry on schedule, it would show that the current benefit formula, including COLAs, is not sustainable. Under that scenario, benefit cuts of about 22% would be needed to continue payments.

The Trustees' projections can change, since they depend on many variables, including annual COLAs. Their baseline assumes relatively modest yearly benefit increases, but the fifth-largest COLA in 35 years is hardly modest.

The passage of President Trump's major tax-and-spending law in July 2025, known as the "Big, Beautiful Bill," already led the Trustees to move the projected depletion date from the first quarter of 2033 to the fourth quarter of 2032 in the latest report.

A second straight year of elevated inflation and a larger-than-average COLA could shorten the life of the trust fund even further. That means the deadline for a sweeping benefit cut of 22% or more for retirees and survivors could arrive sooner than projected.