Social Security's 'Trump Bump' COLA Just Hit a Milestone Not Seen Since 1997

Retirees receiving Social Security senior benefits should see a benefits boost in 2027, thanks to the recently announced cost-of-living adjustment (COLA). On October 14, the Social Security Administration (SSA) announced a 3.6% COLA, the largest since 2023. The COLA also marks a milestone not seen since 1997, though that milestone matters less than it sounds.

Here's what you should know about the COLA, its historic significance, and what it could mean for your benefits in 2027.

How the COLA affects Social Security benefits

The 3.6% COLA impacts nearly 72 million Social Security beneficiaries and about 7.3 million Supplemental Security Income (SSI) recipients. It provides a 3.6% boost to the benefits, adding about $75 more to the average monthly retirement benefit.

According to the SSA, the COLA should bring the average retired worker's monthly benefit from $2,095 to $2,170 when it goes into effect in January 2027. Married couples should receive a combined increase of about $117 per month, raising their average monthly benefits to $3,355 in 2027. SSI recipients should see the increase beginning December 31, 2026.

Why the COLA marks a historic milestone

The 2027 COLA marks the sixth consecutive year of COLA increases at or above 2.5%, a streak that was last achieved from 1988 through 1997. Since the COLA reflects increases in inflation, this historic streak signals that consumers are paying higher prices.

The 2021 and 2023 COLAs were notably large, at 5.9% and 8.7%, respectively. The largest COLA since 1975 was 1980's 14.3% increase.

The factors behind the "Trump bump"

The 2027 COLA has been called the "Trump bump," a commentator's framing tying the increase to the persistent 2026 inflation that's been driven, in part, by the war with Iran and its impact on energy prices.

The SSA calculates the COLA based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. The CPI-W tracks the average changes in prices that workers pay for common goods and services. The COLA calculation is only based on third-quarter data from July through September, so inflation that occurs outside of that period is not factored into the calculation.

What the larger COLA really means

Though Social Security recipients might celebrate an increase in benefits, the COLA and the higher resulting benefits mean that recipients have been paying higher prices because of inflation. The COLA isn't intended to outpace inflation, but just to offset those costs, so even though benefits might increase, retirees aren't necessarily keeping more money in their accounts at the end of the month.

Additionally, since the COLA is only calculated based on third-quarter inflation data, retirees are left on their own to cope with the effects of any inflation that occurs during the rest of the year. If inflation climbs steeply in the first and second quarters, retirees must pay those higher prices on their established benefit amounts for the year. That delay in benefits may take a financial toll on retirees living on fixed budgets.

Does the COLA accurately reflect retirees' expenses

Some experts also state that the COLA doesn't accurately reflect the expenses that retirees pay. The CPI-W reflects the expenses that younger workers pay, but it doesn't specifically track retirees' expenses. Since retirees often spend more of their incomes on healthcare and other expenses, the current COLA calculation doesn't necessarily reflect older Americans' costs.

"Another year, another COLA that falls short of expectations," said Shannon Benton, Executive Director of The Senior Citizens League, in a statement. "Seniors will find themselves disappointed today when they look up the COLA announcement in the news. The reality is that millions depend on Social Security to retire with dignity, and today's announcement puts that ideal in jeopardy for millions."

Social Security's lost buying power

According to an analysis by The Senior Citizens League, though the COLA may be intended to help benefits keep up with inflation, benefits have lost significant buying power over time. The analysis indicates that benefits have lost 13.7% of their buying power over the last decade, meaning a dollar of benefits in 2016 is only worth $0.86 today.

According to the analysis, benefits would need to be increased by almost $296 per month, or about $3,550 per year, to restore their buying power for the average beneficiary.

The Medicare Part B premium's impact on benefits

Medicare Part B premiums may also eat into any benefits increase brought about by the COLA. Medicare Part B premiums are automatically deducted from Social Security benefits, so if those premiums increase in 2027, those expenses might use up part of the benefits increase before seniors ever see the money. Official Medicare Part B rates haven't yet been announced for 2027.

Bottom line

Since the COLA is a percentage, the benefits increases that seniors should see in 2027 may vary. Individuals receiving lower benefits amounts should receive a smaller boost, while higher earners receiving larger benefits checks should see a larger increase.

If you have a my Social Security account, you may use your account to enroll in paperless notices and see your COLA notice online, including your revised benefits amount, beginning in late November. If you haven't enrolled in paperless notices, you should receive your COLA notice by mail in December. Once you know your benefits amount for 2027, it may be a good idea to revisit your retirement plan and budget to make any adjustments necessary.

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