Retirees will see their federal retirement payments go up nearly 4 percent next year, the government announced Wednesday.
The annual Social Security cost-of-living adjustment, known as COLA, will be 3.6 percent, up from 2.8 percent in 2026, the Social Security Administration said.
The yearly adjustment, meant to account for inflation, will kick in December 31, 2026. It will be the third-biggest increase in the past 9 years – but experts aren’t convinced it’s enough.
“The thing to remember about this increase is that it’s simply bringing people up to where they should be based on inflation,” Scott Siff, founder of 55-and-over job matching platform Pivoters, told The Independent in an email. “People have already lost this money due to inflation and been paying the extra expenses month after month. Now they’re just caught up to where they were a year ago.”
When applied to the average Social Security payment of $1,941.76 in August – the most recent federal data – the 2027 COLA would boost that figure to $2011.66.
Jaime Jakubczak, a 68-year-old resident of Buffalo, New York who retired early at 55, called the 3.6 percent cost-of-living adjustment “a pittance,” given how high food, healthcare and gasoline prices have become across the country.
“We were getting ahead a little bit with the COLA based on inflation, but the inflation is so high that it doesn’t offset what our COLA allowance is,” he said
Beyond 2027, the country’s retirement system faces serious challenges. A key funding source for Social Security payments, the Old Age and Survivors Insurance Trust Fund, is projected to run out in 2032.
If that happens, payments would drop by 22 percent, according to federal experts. A cut that big would reduce the average Social Security payment from $1,941.76 to $1,514.57.
The shortfall is on the horizon for two main reasons, according to nonpartisan think-tank Peter G. Peterson Foundation. Americans are living longer which means the system has to support more payments per person, on average. The gap between workers paying into the system and retirees taking payments from the system has also dropped from 3.9-to-1 in 1966 to 2.6-to-1 this year.
“If lawmakers act soon to address the trust fund shortfalls, they will be able to phase in changes gradually and responsibly in a way that does not harm vulnerable populations,” the foundation said in June. “However, delaying reform would require larger changes to the program.”
Little progress has been made in Congress to remedy the situation, even though experts have been sounding the alarm on Social Security for years.
One possible remedy is eliminating the income cap on Social Security tax payments. Under current Internal Revenue Service regulations, workers pay Social Security tax on up to $192,300 in 2027.
Removing that cap could extend the Old Age and Survivors Insurance Trust Fund’s solvency by as much as 35 years, according to the Foundation.
“Increasing or eliminating the Social Security tax cap is just one of many solutions for improving Social Security’s financial outlook – but it’s clear that some sort of action must be taken to ensure the future of this vitally important program,” the group stated.
With additional reporting from The Associated Press
