When you are building a retirement plan, it is easy to focus on how much Social Security you expect to receive when you first claim benefits. But retirement could last for decades, which means another question matters too: How might that income change over time?
Social Security's annual cost-of-living adjustment, commonly called the COLA, is designed to help benefits respond to inflation. Early forecasts indicate that the 2027 adjustment could be approximately 3.5% to 3.6%. That would represent an increase from the 2.8% COLA for 2026.
For the average retired worker, a 3.5% adjustment could translate to approximately $68 to $75 more per month, depending on the starting benefit amount. Of course, individual increases will vary because the percentage is applied to each person's benefit.
For now, these figures are only projections. The official 2027 COLA is expected to be announced on October 14, 2026, after September's Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) data is released. The resulting adjustment will apply to Social Security benefits beginning in January 2027.
If you are still preparing for retirement, why should you care about an adjustment that primarily affects people already receiving benefits?
Because COLAs illustrate an important retirement-planning principle: Your income needs are unlikely to remain static.
Imagine retiring with a budget that comfortably covers groceries, utilities, insurance, transportation, travel, and healthcare. Ten or fifteen years later, those same expenses could look very different. Social Security COLAs can help offset some effects of inflation, but they should not be viewed as a substitute for an overall strategy designed to address rising costs.
It is also important to remember that an increase in your gross Social Security benefit does not necessarily mean your available income will rise by the same amount. Healthcare expenses, taxes, Medicare costs, and other changing expenses can affect your retirement budget.
That is why we encourage clients to look at Social Security as one piece of a larger income plan. Your strategy may also involve retirement accounts, investments, pensions, savings, and other income sources. How and when you draw from those resources can be just as important as how much you have accumulated.
The projected 2027 COLA provides a useful opportunity to revisit your assumptions. Consider how inflation could affect your spending throughout retirement and whether your income strategy has enough flexibility to adapt.
If retirement is on the horizon, schedule an appointment with our financial planning team. We can help you evaluate Social Security alongside your other resources and create a retirement strategy designed with the years ahead in mind.