The US Social Security Administration is expected to announce the 2027 cost-of-living adjustment (COLA) after the September inflation report is released on October 14. The US Bureau of Labor Statistics will publish the report at 8:30 am ET, providing the final inflation data needed to calculate the increase.
More than 71 million traditional Social Security beneficiaries could receive one of the biggest annual benefit increases in the last 35 years in 2027. However, while larger monthly payments could help beneficiaries manage higher expenses, they could also put more pressure on the programme's already strained finances, according to The Motley Fool.
The Senior Citizens League (TSCL), a nonpartisan advocacy group for older Americans, and Mary Johnson, a Social Security and Medicare policy analyst, are both projecting a 3.5% COLA for 2027, according to The Motley Fool. This is an estimate, not the final announced increase.
If the 3.5% estimate is correct, the average retired worker could receive an additional $73 per month in Social Security benefits. That would mean about $876 more over a full year, based on the estimated monthly increase.
A 3.5% increase would tie for the sixth-largest Social Security COLA since 1993. It would also mark the sixth consecutive year with a benefit increase of at least 2.5%, a streak that has not occurred in 30 years.
{{/usCountry}}A 3.5% increase would tie for the sixth-largest Social Security COLA since 1993. It would also mark the sixth consecutive year with a benefit increase of at least 2.5%, a streak that has not occurred in 30 years.
{{/usCountry}}Also read: Why did I get $90 from Social Security? Trump Medicare payment explained
Why Social Security benefits could rise in 2027
Trump's tariffs have pushed up the cost of consumer goods. His trade policies began affecting prices in mid-2025. The tariffs introduced on “Liberation Day” also contributed to higher consumer prices and helped support the 2.8% Social Security COLA provided in 2026.
The US Supreme Court struck down the “Liberation Day” tariffs in February 2026. However, the effects of earlier tariffs on consumer prices may continue, while the Trump administration introduced broad tariffs of 10% to 12.5% on goods from more than 80 countries in late July, The Motley Fool reported.
The Iran war has also added to inflation pressures. After Trump approved attacks against Iran on February 28, Iran shut the Strait of Hormuz to most commercial vessels, disrupting the movement of a major share of the world's crude oil.
Why a bigger Social Security COLA could create problems
While a higher COLA can help older Americans manage rising living costs, it can also increase the amount Social Security pays out in benefits. The Motley Fool warned that unusually large annual increases could worsen the programme's long-term financial challenges.
The Social Security Board of Trustees has warned about the programme's long-term funding shortfall every year since 1985. The programme's projected long-term unfunded obligation reached $29.3 trillion in 2026, according to The Motley Fool. This figure represents the projected gap between future income and expenses over the 75-year period covered by the Trustees' calculations.
Social Security has accumulated reserves from income collected in earlier years. By law, these reserves are invested in special-issue, interest-bearing US government bonds. However, the OASI trust fund's reserves are projected to run out by the fourth quarter of 2032.
Also read: Social Security COLA 2027: Why Medicare deductions could reduce retirees' monthly benefit increase
Social Security is not expected to simply go bankrupt or stop making all payments when its reserves run out. More than 91% of the programme's income comes from the 12.4% payroll tax on earned income. As long as people continue working and paying payroll taxes, the programme will continue receiving money to pay eligible beneficiaries.
The bigger risk is a possible reduction in benefits. If the OASI trust fund's reserves are exhausted, incoming revenue is projected to be insufficient to pay all scheduled benefits. The resulting shortfall could require benefit cuts estimated at 22%.
How the 2027 COLA could worsen the funding gap
The Social Security Board of Trustees considers several factors when estimating the programme's future finances. These include birth rates, net migration, death rates and the annual cost-of-living adjustments given to beneficiaries.
If the projected 3.5% COLA becomes official, the increase could add to Social Security's expenses more than the Trustees' relatively modest assumptions anticipate. The Motley Fool warned that this could cause the OASI trust fund's reserves to run out sooner than currently projected.
Inflation could also remain a problem beyond 2026. The effects of tariffs and the Iran war could continue into 2027, keeping pressure on consumer prices. If inflation remains elevated, it could also lead to another relatively large COLA in 2028. This would potentially increase Social Security's benefit expenses further, adding to the programme's long-term funding challenges.
The central concern is that larger Social Security checks may offer short-term relief while increasing pressure on the programme's long-term finances. If inflation remains high and annual benefit increases stay elevated, the need for future benefit cuts could arrive sooner or the cuts could be larger than currently projected, The Motley Fool warned.
What to watch before the October 14 announcement
The September inflation report, scheduled for October 14 at 8:30 a.m. ET, is the final data point needed to calculate the 2027 Social Security COLA. The report will help determine the official adjustment rather than leave beneficiaries relying on estimates.
Beneficiaries should remember that the projected 3.5% increase and the additional $73 per month are estimates. The final adjustment could differ depending on the inflation figures used in the calculation.
The announcement will provide a clearer picture of how much monthly benefits are expected to rise in 2027. However, the longer-term issue will remain: whether Social Security can continue paying scheduled benefits without major changes to its finances.