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For Social Security's more than 71 million traditional beneficiaries, few announcements have more bearing than the annual cost-of-living adjustment (COLA) reveal in October. Social Security's COLA is effectively a near-annual "raise" given to beneficiaries to offset the impact of inflation (rising prices). Think of it this way: If benefits remained static and the price of goods and services continued to climb, Social Security recipients would steadily lose purchasing power over time.
Social Security's COLA combats this loss of buying power. On Oct. 14, the U.S. Bureau of Labor Statistics published the September inflation report, providing the last data point needed for the Social Security Administration to calculate and announce the 2027 COLA.
President Trump's policies fueled an outsize Social Security raise in 2027. Image source: Official White House Photo by Daniel Torok. Next year's Social Security raise is out of the ordinary, given that it was driven, in part, by President Donald Trump's policies.
This "Trump bump" is historic in three unique ways . To begin with, Social Security beneficiaries will receive a 3.6% increase in their monthly payout come January 2027. For the average retired worker, this'll add approximately $75 per month.
Meanwhile, the typical worker with a disability will bring home an additional $59 per month. A 3.6% raise is well above the norm . Since 1993, only four annual COLAs have surpassed it: 4.1% (2006), 5.8% (2009), 5.9% (2022), and 8.7% (2023), the latter of which was the largest COLA since 1982.
The fifth-largest Social Security raise over the last 35 years has been fueled by two of President Trump's policies: tariffs and the Iran war. As the prevailing inflation rate rises, so has Social Security's COLA. In April 2025, Trump unveiled his "Liberation Day" tariffs, which were a mix of sweeping global tariffs and higher reciprocal tariffs on countries with unfavorable trade imbalances.
Even though the U.S. Supreme Court struck down these tariffs in a February 2026 ruling, their impact on consumer prices provided a boost to Social Security's 2026 COLA . New from the New York Fed: "By February 2026, tariffs had contributed 2.9 pp to goods price inflation, and without them goods prices would have fallen slightly." About one quarter of every point in higher tariff rates shows up in consumer prices within one year. • A 10% across-the-board tariff yields a 2.6% rise in consumer goods prices after one year. • About two thirds of the increase comes from pricier imports, which get passed through quickly. • Another third comes from U.S. made goods, as producers face higher input costs and less import competition.
This takes longer, about 6-12 months, to filter through. — Nick Timiraos (@NickTimiraos) October 6, 2026 The same effect was observed this year. The president imposed a 10% import surcharge lasting 150 days in February, shortly after the Supreme Court invalidated his previous tariffs. In July, the Trump administration enacted sweeping global tariffs ranging from 10% to 12.5% on more than 80 countries.
The inflationary effects of these tariffs led to one of the largest COLAs since 1993. The Trump-led Iran war has also played a key role in 2027's historic Social Security COLA. The ongoing closure of the Strait of Hormuz has stymied the daily flow of roughly 20 million barrels of petroleum liquids .
This historic energy supply disruption has sent fuel prices soaring, meaningfully lifting the prevailing inflation rate. An above-average COLA streak that hasn't been observed in 30 years However, it's not just the comparative size of Social Security's 2027 cost-of-living adjustment that's historic -- it's the recent consistency of outsize raises that needs to be acknowledged. Throughout the 2010s, it felt as if Social Security recipients had to scrape and claw their way to any annual raise.
Deflation (falling prices) led to no COLA being passed along in 2010, 2011, and 2016 , while 2017's 0.3% raise represents the smallest positive COLA in history. 72 million Social Security beneficiaries will see a 3.6% cost-of-living adjustment (COLA) beginning in January 2027. The 26% increase in benefits over the past 5 years is the biggest 5-year increase since 1982-1986. https://t.co/jMp13XUziC — Charlie Bilello (@charliebilello) October 15, 2026 However, the last six years have been a welcome change, with announced COLAs of: 2022 : 5.9% 2023 : 8.7% 2024 : 3.2% 2025 : 2.5% 2026 : 2.8% 2027 : 3.6% The last time Social Security checks rose by at least 2.5% for six consecutive years was 30 years ago ! From 1988 through 1997, annual COLAs clocked in between 2.6% and 5.4%.
A combination of COVID-19 fiscal stimulus, the Federal Reserve leaving interest rates at historic lows for too long, and two years of Trump bumps has led to elevated inflation and outsize Social Security raises for six straight years. Image source: Getty Images. Social Security's Trump bump-driven 2027 COLA is also on track to deliver a silver lining for retirees who are currently enrolled in traditional Medicare .
Qualifying workers aged 65 and over have two prominent healthcare coverage choices: Medicare and Medicare Advantage, the latter of which is offered by private insurance companies that contract with the federal government. Traditional or original Medicare has three core components: Part A : Inpatient hospital care Part B : Outpatient services Part D : Prescription drugs For approximately 99% of workers, there's no cost for Part A. However, retirees pay a standard monthly premium (plus possible income-based surcharges) for Parts B and D.
In 2026, the standard monthly Part B premium is $202.90, and this premium is typically deducted from a retiree's Social Security payout. For the majority of the 21st century, Medicare's Part B premium has been rising at a steadily faster pace than Social Security's COLA . For instance, Social Security raises of 3.2%, 2.5%, and 2.8% from 2024-2026 were met by Medicare Part B premium hikes of 5.9% (2024), 5.9% (2025), and 9.7% (2026), respectively.
When Part B premiums increase considerably faster than Social Security's COLA, it can result in beneficiaries giving back some or all of their annual raise. But according to the 2026 Medicare Trustees Report, the Part B premium is expected to rise by a modest 3.25% to $209.50 per month in 2027. If this forecast proves accurate, it would mark the first time since 2023 that Social Security's COLA (3.6%) is increasing faster than Medicare's monthly Part B premium (3.25%).
This silver lining should allow traditional Medicare enrollees to retain more of their Social Security raise in the upcoming year.
Source: The Motley Fool
