Social Security COLA 2027: What the 3.6% Raise Means for Your Retirement Plan

Good news if you collect Social Security: benefits are going up 3.6% in January. That’s a bigger bump than this year’s 2.8%, and the Social Security Administration estimates it works out to about $75 more a month for the average retired worker.

Here’s the part that doesn’t make the headlines. The raise on your COLA letter isn’t always the raise that lands in your bank account. Medicare premiums come out first. Taxes can take another slice. And depending on what else you’re drawing on, a bigger benefit can even nudge your tax bill up.

None of that is a reason to worry. It’s a reason to take a few minutes before January and look at the whole picture, not just the percentage.

“Once Medicare and taxes take their share, how much of my raise do I actually keep, and does my income plan still hold up?”

What’s changing for Social Security in 2027?

Here’s what the Social Security Administration has confirmed so far, as of October 23, 2026. The one big missing piece is the Medicare Part B premium, which usually arrives in November.

Sources: Social Security Administration 2027 COLA announcement and COLA information page; CMS 2026 Medicare figures. Figures as of October 23, 2026.

Where does 3.6% come from? It’s tied to an inflation index called the CPI-W, comparing prices this summer with last summer. You don’t need to do anything to get it. If you have a my Social Security account, your exact 2027 amount should show up in your Message Center in late November. Otherwise, look for a letter in early December.

So what does 3.6% actually look like?

Here’s how the raise plays out at a few different benefit levels. These are rounded, hypothetical examples, before Medicare or any tax withholding comes out.

Hypothetical illustration only. Your actual 2027 amount will be on your COLA notice from SSA.

Why you may keep less than the full 3.6%

About that new senior deduction

You may have heard there’s “no more tax on Social Security.” That’s not quite what happened. Tax legislation passed in 2025 added an extra deduction of up to $6,000 for each person age 65 or older ($12,000 for a married couple if you both qualify), for tax years 2025 through 2028. It shrinks once modified adjusted gross income goes above $75,000 for single filers or $150,000 for joint filers, and you can take it whether or not you itemize.

It may lower your tax bill, depending on your situation. But it doesn’t change the formula that decides how much of your Social Security is taxable. How much it helps you depends on the rest of your tax picture, so it’s worth looking at together with your withdrawal plan.

Still working and collecting?

Plenty of people start Social Security while they’re still earning a paycheck. If you’re under full retirement age, keep an eye on the earnings limit, because Social Security may hold back part of your benefit:

• Under full retirement age all of 2027: $1 held back for every $2 you earn over $25,560.
• Reaching full retirement age in 2027: $1 held back for every $3 you earn over $67,920, counting only what you earn before the month you hit full retirement age.
• Once you reach full retirement age: no limit at all. Social Security also recalculates your benefit to give you credit for the months it held back.

For anyone born in 1960 or later, full retirement age is 67.

6 things to do before January

A COLA is a natural moment to check in on your plan. You don’t need to overhaul anything. These are good questions to bring to your financial and tax professionals.

1. Budget around what actually hits your accountUse your net deposit after Medicare and any withholding, not the gross amount on your letter.
2. Take a fresh look at your tax withholdingIf more of your benefit becomes taxable, you can change federal withholding on Social Security with IRS Form W-4V, or adjust your estimated tax payments with your tax professional.
3. Time your withdrawals and Roth conversionsIRA distributions, Roth conversions and capital gains all count toward provisional income and IRMAA. Planning them together is a big part of tax-aware planning.
4. Haven’t claimed yet? Revisit your timingYour benefit generally grows 8% for every year you wait past full retirement age, up to age 70, and COLAs still apply along the way. The right timing depends on your health, income needs and spouse’s benefits.
5. Make it a two-person decisionIf you’re married, spousal and survivor benefits make the timing of each claim matter. Our guide to Social Security for married couples walks through it.
6. Don’t count on COLAs alone to beat inflationThe COLA tracks a general price index, which may not match what you actually spend, especially on healthcare. Your savings and other sources of retirement income have to pull their weight too.

Mistakes we see every year

• Spending the whole raise before the new Medicare premium is announced
• Believing the senior deduction made Social Security tax-free
• Taking a big IRA withdrawal without checking how it affects taxes on benefits and Medicare
• Claiming early while still working, then being surprised by the earnings limit
• Filing away the COLA letter without checking the new amount

Your questions about the 2027 Social Security COLA

Sources: Social Security Administration, 2027 COLA announcement · SSA COLA information · Nasdaq / The Motley Fool · Schwab, bonus senior tax deduction. Links to third-party websites are provided for convenience; EFC is not responsible for their content.

This article is for general educational and informational purposes only and is current as of October 23, 2026. It is not individualized investment, insurance, tax or legal advice, and it is not a recommendation to claim benefits at any particular age or to buy or sell any security. Examples are hypothetical and for illustration only. Social Security, Medicare and tax rules and figures change and may differ from those shown; confirm your own benefit amounts with the Social Security Administration. Information from third-party sources is believed to be reliable but is not guaranteed as to accuracy or completeness. This content has not been reviewed or endorsed by the Social Security Administration. EFC Wealth Management Firm, LLC is not affiliated with, endorsed by, or acting on behalf of the Social Security Administration, the Centers for Medicare & Medicaid Services or any government agency. EFC Wealth Management Firm, LLC is a California State Registered Investment Advisor. Cory Chapman is an Investment Adviser Representative offering advisory services through EFC Wealth Management Firm, LLC. Investing involves risk, including possible loss of principal. Past performance does not guarantee future results. A consultation or assessment does not create an advisory relationship; advisory services are provided only under a written client agreement.