Social Security Is Getting a 3.6% Raise in 2027. But How Much Will You Keep?

There’s some good news for the millions of Americans who depend on Social Security to help pay their monthly bills.

Social Security benefits will increase by 3.6% in 2027. That’s a larger increase than the 2.8% adjustment in 2026, and the biggest raise since 2023.

For the average retired worker, that means about $75 more each month, or roughly $900 over the course of the year.

That’s certainly welcome news, especially with the rising cost of groceries, utilities, insurance, and health care.

But there’s something important to understand.

A 3.6% increase in Social Security doesn’t necessarily mean you’ll have 3.6% more money to spend.

Why This Matters

First, What Is a COLA?

Each year, Social Security benefits may increase through something called a Cost-of-Living Adjustment, or COLA.

The idea is simple. As prices go up, Social Security payments should increase to help retirees keep up with those higher costs.

For 2027, that increase will be 3.6%.

The adjustment takes effect automatically in January 2027. People receiving Supplemental Security Income (SSI), a needs-based program for people with limited income and resources, will see their increase beginning December 31, 2026.

You don’t need to apply or take any action to receive the increase.

How Much More Will You Receive?

Here’s what a 3.6% increase looks like at different benefit levels:

These are examples before any deductions.

While the extra money is helpful, there’s another number that matters just as much.

Your Medicare Premium Could Take a Bite Out of That Raise

Most people who receive Social Security also have their Medicare Part B premium deducted directly from their monthly benefit.

Medicare Part B generally covers doctor visits, outpatient care, and other medical services.

If the Medicare premium goes up, part of your Social Security increase may go toward paying that higher cost.

For example, suppose your current Social Security benefit is $2,000 per month.

Your 3.6% increase would add $72 per month.

But if your Medicare premium also increases by $15, your actual increase in take-home benefits would be only $57.

That’s still an increase, but not quite what you might have expected.

The final amount will depend on your Medicare premium and any other deductions that apply.

The Bigger Problem: Your Expenses May Be Rising Faster Than Social Security

Here’s something I think is especially important for older adults and their families.

The government calculates Social Security increases using a measure of inflation based largely on spending patterns of working Americans.

But retirees often spend their money differently.

For example, older adults may spend a larger share of their income on:

• Prescription medications and medical care
• Medicare premiums and supplemental insurance
• Property taxes and homeowners insurance
• Help with daily activities at home
• Assisted living or other long-term care

And some of these costs can increase much faster than the general rate of inflation.

A 3.6% Social Security increase may help cover higher grocery bills or utility costs.

But it won’t necessarily keep pace with the rising cost of home care, assisted living, or nursing home care.

That’s why I encourage families to look beyond the annual Social Security announcement and think about their overall financial picture.

What About People Receiving Both Social Security and SSI?

Some people receive both Social Security and Supplemental Security Income.

Although the COLA applies to both programs, the increase may work a little differently.

That’s because Social Security income affects how much SSI a person can receive.

When Social Security increases, the SSI payment may decrease. The overall increase in income may therefore be smaller than expected.

This can be especially important for people who rely on needs-based benefits to help pay for housing, medical care, or other living expenses.

Simple Lesson

A bigger Social Security check is helpful, but it doesn’t replace the need for a good financial and long-term care plan.

As we get older, it’s not just how much money comes in each month that matters.

It’s also how we prepare for expenses that may be waiting down the road.

Action Step

When your Social Security notice arrives in December, take a few minutes to review it.

Look at your new monthly benefit, any Medicare deductions, and the amount you’ll actually receive.

Then consider whether your retirement income and savings are enough to meet your needs, especially if you or your spouse eventually need long-term care.

If you haven’t reviewed your estate plan or long-term care planning in a while, this is a good time to do so.

A little planning today can help you avoid difficult financial choices tomorrow.

If this topic raises questions for you or your family, feel free to call (517) 548-7400 or contact us online: https://www.michiganestateplans.com/contact-us