Social Security’s 2027 COLA Announced: 6 Things to Know for Retirees and Pre-Retirees

The COLA announcement is the one moment each year when almost everyone looks at their Social Security statement, which makes it the right time to ask a bigger question: is your claiming strategy something you built, or something that just happened? For most households, decisions about when to claim and how Social Security fits into a retirement income strategy are worth far more over a lifetime than any single year's adjustment. 

1. Subtract Medicare premiums and taxes from the COLA increase. 

The headline COLA is a gross figure. For most retirees, the Medicare Part B premium comes off the top before the check goes out. That premium rose to $202.90 in 2026, an increase of nearly 10%, and it consumed a meaningful share of last year's 2.8% adjustment.

A larger benefit can also push more of your Social Security into taxable territory and, at higher incomes, affect your Medicare premium surcharges. The practical question is not "how big is the COLA" but "what is my net raise?" 

2. Know the gap between your Social Security benefit and your expenses. 

The COLA is calculated from the CPI-W, an index that reflects the spending patterns of working-age wage earners. Retirees spend differently: health care, prescriptions, and housing take up a much larger share of the budget. The Senior Citizens League's 2026 Loss of Buying Power study estimates that benefits have lost about 13.7% of their purchasing power since 2016. 

The COLA is designed to help you stay even, not get ahead. Closing the gap is a job for the rest of the portfolio, which is why we build inflation exposure into retirement income plans. 

3. Don't let a COLA drive your Social Security claiming strategy. 

Every year, people who have not yet claimed ask whether they should file now to lock in a generous adjustment. The answer is no. COLAs are applied to your primary insurance amount beginning the year you turn 62, whether or not you have filed, so you do not forfeit a single one by waiting. Those adjustments stack on top of delayed retirement credits of roughly 8% a year past full retirement age, compounding on a larger base the longer you wait. 

The 2026 Trustees Report projects reserves will be depleted in 2033, at which point incoming payroll taxes would cover about 77% of scheduled benefits absent action from Congress. But claiming years early to hedge against a possible future reduction is an expensive form of insurance, and for most households the math does not favor it. 

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4. If you're married, treat the higher earner's claiming age as a joint decision. 

Couples tend to evaluate Social Security separately, which misses the most consequential variable: the survivor benefit. A spousal benefit tops out at 50% of the higher earner's primary insurance amount and earns no delayed retirement credits. A survivor benefit can be worth up to 100% of what the deceased spouse was receiving, including delayed credits. When one spouse dies, the household keeps the larger check and loses the smaller one. If the higher earner claimed at 62, that permanently reduced amount becomes the survivor's income, potentially for decades. 

That is why the higher earner often delays while the lower earner claims earlier for cash flow. But the right answer depends on the age gap, health and longevity, portfolio withdrawals, and more. 

5. If you're divorced or widowed, find out what you're eligible for before you file. 

If you were married at least ten years, are currently unmarried, and are at least 62, you may be able to claim on a former spouse's record. It does not reduce their benefit or require their cooperation. Widows and widowers have added flexibility: survivor benefits are exempt from deemed filing, so you can take one benefit first and switch to the other later. 

6. Consider how your state treats Social Security income. 

Here in our home state of Connecticut, the state exempts 100% of federally taxable Social Security benefits for filers with federal AGI below $75,000 (single, married filing separately, or head of household) or $100,000 (married filing jointly). Cross that line and up to 25% of your benefits becomes subject to state income tax. That threshold is a cliff, not a slope, and a COLA raises your AGI, as does a required minimum distribution, Roth conversion, or capital gain. Near those limits, the order in which you draw from your accounts matters. 

At WHZ Strategic Wealth Advisors, we build Social Security into a coordinated retirement income plan rather than treating it as a standalone decision — that’s how we work to deliver “Absolute Confidence. Unwavering Partnership. For Life.” Schedule a complimentary discovery session at whzwealth.com or call us at (860) 928-2341, and let’s build a plan that helps you Plan Well, Invest Well, and Live Well. 

Authored by WHZ Associate Vice President, Wealth Advisor Logan Lum. AI may have been used in the research and initial drafting of this piece. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your financial advisor. WHZ Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. Securities and advisory services offered through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Advisor. 697 Pomfret Street, Pomfret Center, CT 06259 and 392-A Merrow Road, Tolland, CT 06084, 860.928.2341. http://www.whzwealth.com. 

RELATED FAQs 

When was the 2027 Social Security COLA announced, and how much is it? 

The Social Security Administration announced the 2027 cost-of-living adjustment on October 14, 2026, following the release of September CPI data. The adjustment is [X.X%] and takes effect with January 2027 payments. The COLA is calculated by comparing the average CPI-W for July through September against the same three months of the prior year. 

Why don’t Social Security COLAs keep up with what retirees actually spend? 

COLAs are tied to the CPI-W, an index that weights the spending patterns of working-age wage earners rather than retirees. Retired households spend proportionally more on health care and housing and less on transportation. The Senior Citizens League estimates benefits have lost roughly 13.7% of their buying power since 2016 as a result. 

Do I lose COLA increases if I delay claiming Social Security? 

No. Cost-of-living adjustments are applied to your primary insurance amount beginning the year you turn 62, whether or not you have filed. If you wait until 70, your first check reflects every COLA since 62 plus delayed retirement credits of about 8% per year past full retirement age. Claiming early to “capture” a large COLA does not work. 

How does the higher earner’s claiming age affect the surviving spouse? 

A survivor benefit can equal up to 100% of what the deceased spouse was receiving, including delayed retirement credits. When one spouse dies, the household keeps the larger of the two benefits and loses the smaller entirely. If the higher earner claimed early, the survivor lives on that permanently reduced amount, and future COLAs compound on the smaller base. 

Can I claim Social Security on a former spouse’s record? 

Possibly. If the marriage lasted at least ten years, you are currently unmarried, and you are at least 62, you may be eligible to claim on an ex-spouse’s record. Doing so does not reduce their benefit and does not require their involvement. It is worth checking, since the benefit on their record is sometimes larger than your own. 

Does Connecticut tax Social Security benefits? 

Connecticut exempts 100% of federally taxable Social Security benefits for filers with federal AGI below $75,000 (single, married filing separately, or head of household) or $100,000 (married filing jointly). Above those thresholds, no more than 25% of benefits is subject to Connecticut income tax. Because it functions as a cliff, a COLA, an RMD, or a Roth conversion that pushes AGI over the line can change your treatment. 

Should the 2027 COLA change when I claim Social Security? 

On its own, no. A single year’s adjustment is not a reason to file, and it is credited to your record regardless. What the announcement is good for is prompting a review: whether your claiming age fits your longevity outlook, how it affects a spouse or survivor, how it interacts with withdrawals from other accounts, and where it leaves your AGI. 

Authored by WHZ Associate Vice President, Wealth Advisor Logan Lum. AI may have been used in the research and initial drafting of this piece. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. 697 Pomfret Street, Pomfret Center, CT 06259 and 392-A Merrow Road, Tolland, CT 06084, 860.928.2341. www.whzwealth.com. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your financial advisor. WHZ Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice.

RELATED FAQs 

How did OBBBA change taxes for high-earning executives? 

OBBBA made the lower TCJA tax brackets permanent, keeping the top rate at 37% rather than letting it climb to 39.6%. At the same time, it introduced a new limit (the “2/37 rule”) that caps the value of itemized deductions at about 35 cents per dollar for those in the top bracket, and it added a SALT deduction phase-out for incomes above $505,000. 

What is the 2/37 rule and who does it affect? 

The 2/37 rule reduces the tax benefit of itemized deductions for taxpayers in the 37% bracket, effectively valuing each dollar of deductions at roughly 35 cents instead of 37. It affects high earners — single filers above about $640,600 and joint filers above about $768,700 in 2026 — and makes the timing of large income events more important. 

Is nonqualified deferred compensation still worth it under permanent tax rates? 

It can be. NQDC lets you defer income and the tax on it to a future year, ideally one with a lower rate. Permanent brackets make that bet more predictable. The main caution is that NQDC isn’t protected like a 401(k) — it carries your employer’s credit risk and can’t be rolled into an IRA — so it’s best used after maxing out qualified accounts and without over-concentrating. 

How should I time stock option exercises in 2026? 

Exercising nonqualified stock options creates ordinary income that can push you into the top bracket, where deductions are worth less under the 2/37 rule. If a large exercise would cross the 37% threshold, consider straddling it across two tax years — exercising up to the threshold in each — to keep more income and deductions in a lower-rate zone. Model your projected income before exercising. 

Why does the SALT phase-out matter so much in Connecticut? 

OBBBA raised the SALT deduction cap to $40,000, but it phases out for incomes above $505,000 of MAGI and drops back to $10,000 by $600,000. Connecticut has a top state income tax rate of 6.99% and some of the highest property taxes in the country, so executives in that income range pay steep state and local taxes while losing most of the federal deduction that used to offset them. 

Do high earners stop paying Social Security tax during the year? 

Yes. In 2026, Social Security tax applies only to the first $184,500 of wages. High-earning executives typically exceed that cap partway through the year, meaning later paychecks, bonuses, or option income arrive without the 6.2% Social Security tax — a small tailwind that can make late-year compensation timing more efficient. 

Should I revisit executive compensation agreements I set up years ago? 

It’s worth a review. Many deferral elections, exercise plans, and giving strategies were built when rates were set to rise and the deduction rules were different. With brackets now permanent and deductions reshaped, an older arrangement may no longer be optimal. A coordinated review with your advisor can confirm whether your plan still fits the current rules.