Social Security 2027 COLA may be 3.7% but still not offset Medicare
Social Security checks are expected to increase next year by 3.7%, based on the June consumer inflation report, a new estimate shows.
A cost-of-living adjustment of 3.7% is down a full percentage point from last month's estimate as inflation cooled in June, mostly because of lower gasoline prices. Overall annual consumer prices rose 3.5% in June, down sharply from 4.2% in May. The core rate, excluding the volatile energy and food sectors, was at 2.6%.
An inflation decline this large in June is welcomed but unusual, analysts said. Whether inflation continues to cool is yet to be seen, they said. And much of, if not all, the COLA increase will likely be swallowed by expected increases in Medicare and drug costs, they said.
"This is a significant drop in inflation, and one that we‘ve rarely seen in the June [inflation] data over the past five years," said Mary Johnson, a Social Security and Medicare analyst who tracks and calculates the COLA estimate. "There was only one other time when inflation dropped in the month of June, and not by this amount. With ongoing tensions with Iran in the Strait of Hormuz affecting oil prices, it is unclear whether this drop in inflation will be sustained."
How much would a 3.7% COLA mean for Social Security recipients?
A Social Security COLA of 3.7% would increase an average benefit of $2,000 by $74 per month, Johnson calculated.
The 2.8% COLA increase for 2026 raised the average retired worker's check by about $56 per month, according to the Social Security Administration.
Would a 3.7% COLA be considered a large increase?
A 3.7% increase would be the largest since 2022, when COLA was 8.7%, SSA data shows. In 2022, inflation reached the highest level in 40 years.
Would a 3.7% COLA boost cover Medicare premium increases in 2027?
According to a recent estimate in the 2026 Medicare Trustees report, the base Medicare Part B premium, or amount paid by individuals with incomes below $109,000 and joint filers with incomes below $218,000, is expected to increase about $6.60, or 3.3%, to $209.50 in 2027 from $202.90 the prior year.
"This would be a lower-than-average Part B increase, which have averaged 5.4% per year over the past decade," Johnson said. "While moderation in the Part B increase is likely to be welcomed, many Medicare beneficiaries may find other Medicare costs much higher, including the Part D deductible which is increasing to as much as $700 in 2027."
How is final COLA calculated and when will it be announced?
The Social Security Administration bases its COLA each year on average annual increases in the consumer price index for urban wage earners and clerical workers (CPI-W) from July through September. However, "these monthly check-ins can give a glimpse of what the actual inflation data indicates for the third quarter, and that can be useful in making retirement financial decisions such as renewing a CD or budgeting," Johnson said.
The index for urban wage earners largely reflects the broad index the Labor Department releases each month, although it sometimes differs slightly. Last month, the overall consumer price index rose 3.5% and the index for urban wage earners happened to increase by the same amount.
The final COLA for the next year is usually announced in October.
Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
This article originally appeared on USA TODAY: Social Security 2027 COLA may be 3.7% but still not offset Medicare
Reporting by Medora Lee, USA TODAY / USA TODAY
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This story was originally published July 14, 2026 at 3:52 PM.