About 75 million Americans who receive Social Security or Supplemental Security Income will get a raise in the new year. Benefits will rise 3.6% in 2027, according to the Associated Press, which works out to roughly $75 more a month for the average retired worker. That is larger than this year’s 2.8% increase.

Here is how the adjustment is calculated, when you will see it and why the amount that reaches your bank account may be a little smaller than the headline.

How the COLA is calculated

The cost-of-living adjustment, or COLA, is set by a formula written into law, not by Congress or the president each year. The Social Security Administration compares an inflation measure called the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, in the third quarter of this year with the same period a year earlier. The percentage increase becomes the COLA. If prices didn’t rise, there would be no increase, but benefits never go down because of the formula.

The idea is simple: protect the buying power of benefits as prices rise. Without the adjustment, a fixed benefit would lose value every year.

When the raise arrives

  • Social Security benefits: the higher amount starts with payments for January 2027, which most people receive in January.
  • Supplemental Security Income (SSI): payments normally arrive on the first of the month. Because January 1 is a holiday, the first higher SSI payment arrives on Thursday, December 31, 2026.

The SSA typically posts each person’s exact new benefit amount in the Message Center of their online my Social Security account in early December, and mails notices to people who don’t use the online account.

Why your increase may be smaller

The 3.6% applies to your gross benefit. Several things can reduce what you actually receive:

  • Medicare premiums. Most beneficiaries have their Medicare Part B premium deducted directly from their Social Security check. When the premium rises, it eats into the COLA. The new premium for 2027 is announced separately by Medicare.
  • Medicare drug plans and Advantage plans. If you pay premiums for these through your benefit, changes in your plan for 2027 also affect your net payment. Open enrollment runs until December 7; see our Medicare guide.
  • Taxes. Depending on your total income, part of your benefit may be subject to federal income tax, and a few states also tax benefits. A higher benefit can mean slightly higher taxes.

Is 3.6% enough?

That depends on what you spend money on. The CPI-W measures prices paid by working households, which spend their money differently from retirees. Older Americans tend to spend more on health care and housing, and some economists argue that an index built around their spending, known as the CPI-E, would usually produce slightly higher raises. Congress has debated switching indexes for years without changing the law.

What else changes in January

Each year, the SSA also adjusts other figures tied to wage and price growth, such as the maximum amount of earnings subject to the Social Security payroll tax and the earnings limits for people who claim benefits before their full retirement age and keep working. Those numbers are published alongside the COLA on the SSA’s website.

What we think

A 3.6% raise is meaningful, especially after a smaller increase this year, but it is not a windfall. For many retirees, rising Medicare and drug plan costs will absorb part of it, so the real gain depends on your own coverage.

The practical step is to review your notice in December, and to use Medicare open enrollment before December 7 to make sure your plan costs aren’t quietly taking more of the raise than they need to.