The United States Social Security Administration has announced that benefits will increase by 3.6 percent beginning in January 2027, marking a four-year high for the annual cost-of-living adjustment.
The announcement came on Wednesday, shortly after the Labor Department published its Consumer Price Index report for September. The adjustment will boost average monthly payments by approximately $75 for older adults and people with disabilities.
The increase will take effect in January for around 72 million Social Security recipients. Nearly 73 million Supplemental Security Income beneficiaries will see the change applied from December 31.
Starting in 2027, the maximum taxable wage base will rise to $192,300, up from $184,500 in 2026. The previous year's cost-of-living adjustment stood at 2.8 percent.
The Social Security Administration calculates the annual adjustment using the average of the Consumer Price Index for urban wage earners and clerical workers, known as the CPI-W, over the months of July, August, and September. That index rose 3.9 percent in September and averaged approximately 3.6 percent across the three-month period.
The broader CPI report showed consumer prices in September were up 3.7 percent from a year ago, a larger annual increase than the previous month. Prices jumped 0.6 percent between August and September. Stripping out volatile energy and food prices, core inflation stood at 2.6 percent in September.
A spike in energy prices was identified as a primary driver of the increase. The cost of fuel oil has risen 74 percent over the past year. Refined petroleum products, including diesel fuel, have climbed to record highs, widening inflationary pressures.
Advocates for older Americans welcomed the Social Security adjustment. "It helps millions of Americans keep up with rising costs for groceries, routine bills, healthcare and other everyday expenses," said AARP CEO Myechia Minter-Jordan.
However, critics argued the increase falls short of covering seniors' real expenses. "It won't be enough for most seniors to even tread water financially," said Max Richtman, president of the National Committee to Preserve Social Security and Medicare.
An AARP poll from September found that about three-quarters of Americans aged 50 or older disagreed that a cost-of-living adjustment in the range of 3.5 percent would be sufficient to keep pace with rising prices.
Workers are also feeling the pressure. Average wages in September rose just 3 percent, meaning the typical worker's purchasing power has eroded over the past year.
"People are kind of saying, 'Something isn't right with that,'" said economist Brian Bethune of Boston College. "I'm working harder. I'm more productive. And this is not a square deal."
Beth Hammack, who heads the Cleveland Federal Reserve Bank, warned this week that repeated supply shocks could entrench an inflationary mindset. She cited a Cleveland-area retailer raising prices not only to cover current costs but in anticipation of higher costs ahead.
"This could be a sign that an inflationary mindset is taking hold," Hammack said. "When people expect higher prices, they make decisions with this in mind. It can become a self-fulfilling prophecy that makes it harder for monetary policy to bring inflation back down."
Federal Reserve policymakers are set to meet in two weeks to discuss interest rates. Investors currently see roughly a 50-50 chance the Fed will raise its benchmark rate in October in an effort to combat inflation.
