Social Security's 2027 COLA Stands Out in Three Historic Ways

Key Points

• More than 71 million traditional Social Security beneficiaries are set to receive the fifth-largest increase in the past 35 years in 2027.

• The program's unusually large annual increase also marks a first-in-30-years development.

• A rare positive outcome may be in store for tens of millions of retirees in the year ahead.

For Social Security's more than 71 million traditional beneficiaries, few announcements matter more than the annual cost-of-living adjustment, or COLA, released in October.

Social Security's COLA is essentially an almost yearly raise designed to help beneficiaries keep pace with inflation. Without it, fixed benefits would lose purchasing power as prices rise. The adjustment is meant to offset that erosion.

The September inflation report from the U.S. Bureau of Labor Statistics provided the final data needed for the Social Security Administration to determine and announce the 2027 COLA.

Next year's benefit increase is unusual because it was shaped in part by President Donald Trump's policies. That so-called Trump bump is historic in three distinct ways.

The fifth-largest Social Security raise in 35 years

To start, Social Security beneficiaries will see a 3.6% boost in monthly payments beginning in January 2027. For the average retired worker, that translates to about $75 more each month. A typical disabled worker will receive about $59 more monthly.

A 3.6% increase is far above the long-term average. Since 1993, only four annual COLAs have been larger: 4.1% in 2006, 5.8% in 2009, 5.9% in 2022, and 8.7% in 2023, which was the biggest increase since 1982.

The fifth-largest COLA in the past 35 years has been driven by two Trump policies: tariffs and the Iran war. As inflation has climbed, Social Security's COLA has followed.

Trump unveiled his "Liberation Day" tariffs in April 2025, combining broad global tariffs with higher reciprocal tariffs on countries with unfavorable trade balances. Although the U.S. Supreme Court later struck down those tariffs in a February 2026 ruling, their effect on consumer prices helped lift Social Security's 2026 COLA.

The same pattern appeared this year. The president imposed a 10% import surcharge for 150 days in February, soon after the Supreme Court invalidated the earlier tariffs. In July, the administration put sweeping global tariffs of 10% to 12.5% on more than 80 countries into effect. The inflationary pressure from those measures helped produce one of the largest COLAs since 1993.

The Trump-led Iran war has also contributed to the historic 2027 COLA. The continued closure of the Strait of Hormuz has disrupted the daily movement of roughly 20 million barrels of petroleum liquids. That energy supply shock has pushed fuel prices higher and added to inflation.

An above-average COLA streak not seen in 30 years

What makes 2027 notable is not only the size of the COLA, but also the string of unusually large increases that has preceded it.

During the 2010s, Social Security beneficiaries had to wait through several years with little or no increase. Deflation led to no COLA in 2010, 2011, and 2016, while the 0.3% increase in 2017 was the smallest positive COLA on record.

The last time Social Security benefits rose by at least 2.5% for six straight years was 30 years ago. From 1988 through 1997, annual COLAs ranged from 2.6% to 5.4%.

A mix of COVID-19 fiscal stimulus, the Federal Reserve keeping interest rates at historic lows for too long, and two years of Trump-related inflation pressures has resulted in elevated inflation and sizable Social Security increases for six consecutive years.

Social Security's first silver lining since 2023 is expected

The Trump bump-driven 2027 COLA is also expected to provide a welcome benefit for retirees enrolled in traditional Medicare.

Eligible workers age 65 and older have two major health coverage options: Medicare and Medicare Advantage, the latter being provided by private insurers that contract with the federal government.

For about 99% of workers, Part A carries no premium. Retirees, however, pay a standard monthly premium, plus possible income-related surcharges, for Parts B and D. In 2026, the standard monthly Part B premium is $202.90, and it is usually deducted from a retiree's Social Security check.

For much of the 21st century, Medicare Part B premiums have risen faster than Social Security's COLA. For example, Social Security increases of 3.2%, 2.5%, and 2.8% in 2024 through 2026 were offset by Part B premium increases of 5.9% in 2024, 5.9% in 2025, and 9.7% in 2026. When Part B premiums rise much faster than the COLA, beneficiaries can end up giving back some or even all of their annual increase.

But the 2026 Medicare Trustees Report projects that the Part B premium will rise by a relatively modest 3.25% to $209.50 per month in 2027. If that forecast holds, it would be the first time since 2023 that Social Security's COLA, at 3.6%, is rising faster than the monthly Part B premium.

That would give traditional Medicare enrollees a better chance to keep more of their Social Security increase in the coming year.