Social Security's 2027 COLA, projected near 3.5 percent, is the first raise since 2023 to outpace Medicare Part B growth while draining the trust fund toward a 22 percent cut.
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Social Security's 3.5% 2027 COLA Accelerates Trust Fund Drain
A second consecutive year of Trump-policy inflation is set to lift Social Security's 2027 raise to roughly 3.5 percent, an outsize adjustment that accelerates the program's trust fund toward a 22 percent benefit cut.
The Senior Citizens League, a nonpartisan advocacy group for older Americans, projects the cost-of-living adjustment at 3.6 percent, while independent policy analyst Mary Johnson estimates 3.4 percent, putting the average near 3.5 percent.
Two of President Donald Trump's policies are feeding the inflation behind the raise. The administration reimposed sweeping tariffs of 10 percent to 12.5 percent on imports from more than 80 countries in July, and the Iran war has kept the Strait of Hormuz — conduit for a fifth of the world's petroleum liquids — largely closed for six months. July personal consumption expenditures inflation ran at 3.7 percent, nearly double the Federal Reserve's 2 percent target, with the core gauge at 3.3 percent.
The projected raise cuts both ways. The Social Security Board of Trustees models modest annual COLAs in its forecasts, and the Old-Age and Survivors Insurance trust fund is on track to exhaust its asset reserves in the fourth quarter of 2032 — a depletion that would force benefit cuts estimated at 22 percent unless Congress acts.
First Raise Since 2023 to Outpace Medicare Part B
For the roughly 55 million retired workers drawing a benefit, the projected raise carries a rare silver lining. The 2026 Medicare Trustees Report sees the standard Part B premium climbing 3.25 percent to $209.50 a month next year, slower than the projected COLA for the first time since 2023. In recent years the premium has routinely outpaced the benefit increase: Part B jumped 5.9 percent in 2024 and 2025 and 9.7 percent in 2026, while Social Security COLAs rose 3.2 percent, 2.5 percent and 2.8 percent over the same span, eroding much of each annual raise.
The boost follows a similar lift last year. Trump's Liberation Day tariffs, unveiled April 2, 2025, were struck down by the Supreme Court in February 2026, but their effect on consumer prices still raised the 2026 COLA. The reimposed duties and the Iran war now point to a second straight year of above-average adjustments.
A 3.5% Raise Shortens the Runway to a 22% Cut
The flip side is the strain on the OASI trust fund, whose asset reserves — excess payroll-tax income invested in special-issue government bonds — are forecast to run out in the fourth quarter of 2032. A raise near 3.5 percent would drain them faster than the Trustees Report's modest assumptions. The program faces a long-term unfunded obligation of $29.3 trillion over 75 years, up more than $4 trillion from the prior report. A raise near 3.5 percent would tie for the seventh-largest percentage increase since 1992 and mark a sixth straight year of COLAs at or above 2.5 percent, a streak last seen from 1988 to 1997.
The tension is structural. Gallup surveys show 80 percent to 90 percent of retirees rely on Social Security income in some capacity, so next year's raise restores buying power even as each outsize adjustment shortens the runway to the 22 percent cut the program cannot sustain. The September inflation report due Oct. 14 will set the final COLA figure; beneficiaries should verify the official announcement against these projections.
This article is for informational purposes only and does not constitute professional or investment advice.
