Millions of Americans receiving Social Security benefits will see higher monthly payments in 2027, as the Social Security Administration (SSA) has announced a 3.6% cost-of-living adjustment (COLA), the largest increase since 2023 and higher than the 2.8% adjustment for 2026.

The increase is designed to help benefits keep pace with inflation. However, Medicare premiums, taxes, and other expenses could affect how much of that additional income recipients actually take home.

How Much Will Social Security Benefits Increase?

The adjustment will affect approximately 76 million Americans receiving Social Security and Supplemental Security Income (SSI) benefits. For the average retired worker, monthly benefits are expected to increase by approximately $75, from $2,095 to $2,170.

The actual increase will depend on each recipient’s current benefit amount. The SSA estimates the following changes for 2027:

Social Security recipients will begin receiving higher payments in January 2027, while SSI recipients will see their adjustment beginning December 31, 2026.

Medicare Premiums and Taxes May Reduce the Increase

For many individuals enrolled in Medicare Part B, premiums are deducted directly from Social Security payments. Any 2027 premium increase could offset part of the COLA. Other healthcare expenses may further affect retirement budgets.

Higher benefits could also affect federal income taxes. Depending on filing status and combined income, up to 85% of Social Security benefits may be taxable. The income thresholds used to determine whether benefits are taxable are not automatically adjusted for inflation, meaning a COLA could increase the taxable portion of benefits for some recipients.

Individuals receiving retirement account distributions, pension income, or investment income should consider how the increase may affect their overall tax situation.

What the Changes Mean for Working Individuals

Along with the COLA, several Social Security earnings thresholds will increase in 2027. The maximum amount of earnings subject to Social Security payroll taxes will rise from $184,500 in 2026 to $192,300 in 2027.

For individuals collecting Social Security retirement benefits before reaching full retirement age, the annual earnings limit will increase to $25,560. The SSA generally withholds $1 in benefits for every $2 earned above that threshold.

For individuals reaching full retirement age in 2027, the limit increases to $67,920, with $1 withheld for every $3 earned above the threshold before the month they reach full retirement age. Once individuals reach full retirement age, the earnings test no longer applies. The SSA also considers benefits withheld under the earnings test when it recalculates monthly payments at full retirement age.

Planning for the 2027 Social Security Increase

The SSA expects to make personalized COLA notices available to most beneficiaries through their my Social Security accounts beginning in late November 2026, with mailed notices generally following in December. Individuals who wish to receive their notices online should set up their accounts and enroll in paperless notices by November 18.

As you prepare for the coming year, contact your CRI advisor to discuss how these changes may affect your retirement income and tax planning strategies. Understanding how the adjustment fits into your broader financial picture can help you make more informed decisions about your retirement income.