Retirees will appreciate the bump, but is it enough?
Retirees will appreciate the bump, but is it enough?
Of the nearly 55 million people who receive Social Security retirement benefits, many rely on it for most or all of their retirement income. That's why the announcement of the annual cost-of-living adjustment (COLA) is a big deal. It lets Social Security recipients start planning their budgets for the coming year.
Beginning in 2027, recipients will receive a 3.6% bump to their benefits, one of the larger COLAs in the past 30 years. Here's how it translates to dollars for different current monthly benefit amounts:
In August, the average monthly benefit was $2,087, so a 3.6% COLA would pay out around an extra $75 per month.
How did we arrive at the 3.6% COLA?
The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). It's a subset of the CPI-U, the U.S.'s main inflation index, and covers around 30% of the U.S. population.
To set the COLA, Social Security averages the CPI-W for the current year, compares it to the previous year's average, and then sets the COLA as the percentage increase, rounded to the nearest one-tenth of one percent.
For example, the CPI-W average in 2025 was 317.265, which was 2.76% higher than the 2024 average of 308.729. That gave us a 2.8% COLA for 2026.
The CPI-W average this year was 328.746, which is 3.62% higher than 2025's average, and how we landed at the 3.6% COLA for 2027.
How does the 3.6% COLA compare to past COLAs?
Averytin News Financial update.