Three Reasons Why a 3.8 Percent 2027 Social Security COLA Hike Won't Keep Up With Retirees' Expenses

Financial experts advise focusing first on large recurring expenses rather than small discretionary purchases.

Published: 8/3/2026, 1:35:05 PM EDT

Three Reasons Why a 3.8 Percent 2027 Social Security COLA Hike Won't Keep Up With Retirees' Expenses — Retirees from nearby a mobile home community play dice in a hotel where they sought shelter in Bonita Springs, Fla., on Sept. 9, 2017. (Nicholas Kamm/AFP/Getty Images)

U.S. retirees should see a modest uptick in 2027 Social Security benefits, but that may not be enough to stay ahead of rising cost-of-living expenses.

According to Social Security estimates, program recipients will receive an average of $77 per month more in Social Security cost-of-living adjustments (COLA) next year, using the highest rate of adjustment of 3.8 percent from the Senior Citizens League COLA Watch. That rate would lead to about $2,103 for all of 2027.

The Social Security Administration has relied on economic indicators over the summer months to peg the following year’s COLA adjustments, and 2026 figures over July, August, and September should be no different.

Yet the Senior League notes that even a seemingly robust 3.8 percent COLA upgrade still won’t cover the average U.S. senior’s actual annual cost-of -living dollar amount of $2,700 per month, falling short by $577 monthly.

“We’re seeing inflation on the rise when more than half of seniors already can’t afford basic living standards,” Shannon Benton, TSCL’s executive director, said in a statement. “We’re talking about food, a roof over their head, and transportation. Many seniors already have to skip doctor’s appointments due to costs, which costs all of us more in the long run when we swap preventative care for emergency care.”

A 3.8 percent COLA rate might sound like a lot compared to last year’s 2.8 percent, “but it won’t be enough to make up the difference between what seniors bring in and what they need to live with dignity,” Benton added.

That’s the point of the entire SSA program. “It’s to grant some measure of protection against the loss of a job and against poverty-ridden old age,” Benton added.

Here’s Why the COLA Numbers May Not Work For Social Security Recipients

There’s no single reason the SSA may be drawing skewed COLA numbers that under-emphasize U.S seniors’ cost-of-living figures, but where there’s smoke, there might be fire. These three factors may help clear the air.

SSA May Be Getting the Metrics Wrong

Part of the problem is the Social Security COLA formula, which critics say is producing flawed economic numbers.

“The COLA is not a judgment call; it's mechanical,” Philip van den Berge, a financial market analyst and founder at Intrinsiq, an economic and stock market analysis firm, told NTD.

SSA takes the average CPI-W for July, August, and September, compares it to the same quarter a year earlier, and that's the number. “An estimate this far out is really a forecast of three months of CPI-W prints, and forecasters are usually within a few tenths,” van den Berge said.

In short, the answer is that 3.8 percent is probably a decent guess at the arithmetic. “Yet whether the arithmetic is measuring the right thing is the actual story,” van den Berge added.

There's Also a 15-month Lag Baked Into the Numbers

The COLA is set on July to September data and then applies for the whole of the following calendar year. Yet if prices accelerate in that window, retirees absorb the difference in real terms and only get compensated a year later. “In a disinflationary period that lag works in their favor,” van den Berge said. “In an accelerating one it's a real income cut.”

The COLA is gross, but the Social Security check is a net payment. Any Social Security recipient knows that the SSA deducts Medicare costs first, and that reduces a Social Security check, but the COLA figures don’t account for that.

“Medicare Part B premiums are deducted directly, and Part B has been growing meaningfully faster than the COLA for years,” van den Berge said. “A retiree can read '3.8 percent' in the news and see substantially less than that land in the bank account.”

Additionally, the thresholds at which Social Security benefits become taxable ($25,000 for single filers, $32,000 for joint) were set in 1983 and have never been indexed to inflation. “Every COLA pushes more retirees over a line that never moves,” van den Berge added. “It's a slow tax increase that nobody voted for.”

Here's What Retirees Can Do Now to Beef Up Their Bank Accounts, COLA or No COLA

What can retirees do now? Financial experts advise focusing first on large recurring expenses rather than small discretionary purchases.

“That means reviewing housing, insurance, prescription coverage, utilities and subscriptions; compare Medicare and Part D options during open enrollment; use available senior and utility-assistance programs; and keep a cash buffer for expenses that do not move in line with the COLA,” Christopher M. Uhl, chief marketing officer at OVTLYR, a market trading and analysis firm, told NTD. “The key is to plan from the net monthly benefit after premiums and taxes—not the announced percentage alone.”

Perhaps the broader lesson is that COLA protects against average inflation, not each retiree’s personal inflation rate. “Households need to compare their own major expenses with the adjustment rather than assuming the headline figure guarantees unchanged purchasing power,” Uhl noted.

The views and opinions expressed are those of the interviewees. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. NTD does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. NTD holds no liability for the accuracy or timeliness of the information provided.