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Biggest Social Security Changes for 2027
How the COLA, Medicare costs and other changes will impact current and future beneficiaries
6-minute read
Jon Krause
Key takeaways
- The Social Security cost-of-living adjustment will increase payments by 3.6 percent in 2027, boosting the average retirement benefit by about $75 a month.
- A projected $6.60 increase in the standard Medicare Part B premium could partially offset the COLA.
- Workers will pay Social Security taxes on earnings up to $192,300.
The biggest cost-of-living adjustment (COLA) in four years. A probable uptick in Medicare premiums. And new clarity about Social Security’s benefit claiming options. These are a few of the major changes coming to Social Security in 2027. Driven by new federal policies and economic shifts, they will affect the financial lives of more than 71 million Social Security recipients, as well as the estimated 185 million workers (and future beneficiaries) paying into the system. Here’s what you need to know.
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1. COLA
Reflecting an upswing in inflation, Social Security and Supplemental Security Income (SSI) payments will go up by 3.6 percent next year. That’s up from a 2.8 percent COLA in 2026.
The Social Security Administration (SSA) estimates that the average retirement benefit will rise by about $75 a month, from $2,095 to $2,170, starting with December benefit payments that go out in January 2027. (SSI recipients will get their first COLA-boosted payment Dec. 31.)
It’s the biggest COLA since 2023, amid persistent inflation that has left many older adults feeling financially squeezed. Eighty percent of Social Security recipients surveyed by AARP in September (several weeks before the COLA was announced)said that a 3.5 percent COLA would not be enough to help them keep up with rising prices.
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The average COLA since 2000 has been about 2.6 percent, even after accounting for the spike in consumer prices that produced benefit increases of 5.9 percent in 2022 and 8.7 percent in 2023.
The COLA is applied to survivor benefits, family benefits and Social Security Disability Insurance (SSDI), as well as retirement benefits and SSI, a monthly benefit administered by the SSA for people with low incomes and limited assets who are 65 or older, blind or have a disability.
2. Medicare premiums
The Centers for Medicare & Medicaid Services projects that the standard monthly premium for Medicare Part B, which covers doctor visits and other outpatient care, will increase by about 3 percent in 2027, from $202.90 to $209.50. The final premium amount will be announced later this fall.
Most Medicare enrollees pay this standard rate, typically as a deduction from their Social Security payments, so any premium increase has the effect of partially reducing the COLA — in this case, by $6.60 a month, if the projections hold true.
3. Paying Social Security taxes
Social Security is primarily funded by a 12.4 percent tax on most workers’ earnings. If you earn wages, you pay 6.2 percent (through FICA withholding from your paycheck), and your employer pays 6.2 percent. Self-employed people pay the full 12.4 percent as part of their federal tax return.
The tax rate is not changing, but the amount of income subject to it is adjusted annually to reflect national wage trends. In 2027, you’ll pay the tax on work income up to $192,300 (up from $184,500 in 2026). Earnings above that threshold are not taxed for the purpose of funding Social Security, nor is income from nonwork sources, such as investments, interest or withdrawals from retirement accounts .
4. New labels for claiming ages
The SSA will change the terms it uses to describe various options for claiming retirement benefits under the Claiming Age Clarity Act, an AARP-backed bill which passed Congress in October and is expected to be signed into law in the coming weeks.
The measure aims to help older Americans make better-informed decisions about when to claim Social Security — and potentially get a bigger lifetime payout.
For example, the SSA currently labels 62, the minimum age to claim retirement benefits, as “early eligibility age.” Starting in 2027, that will be called “minimum monthly benefit age” to more clearly convey the impact of claiming at 62. Starting Social Security at that age results in monthly payments up to 30 percent lower than what you’d get by waiting until full retirement age (FRA) which is 67 for those born in 1960 and later.
Similarly, the term “full retirement age,” when you can claim 100 percent of the benefit calculated from your lifetime earnings history, will become the “standard monthly benefit age.” And age 70, when you can claim your highest possible monthly payment thanks to Social Security’s “delayed retirement credits,” will be labeled “maximum monthly benefit age.”
5. Full retirement age
For the past several years, the Social Security full retirement age — or standard monthly benefit age, as it will be called — has been a moving target, inching up two months at a time depending on a person’s birth year. For example, people born in 1957 reached FRA at 66 and 6 months while those born in 1958 hit FRA at 66 and 8 months and those born in 1959 attained FRA at 66 and 10 months.
Those gradual increases were the product of a 1983 law that shored up Social Security’s finances, in part by raising the FRA from 65 to 67. In 2027, that law comes into full effect, with the FRA settling at 67 for anyone born in 1960 or later.
6. Social Security earnings test
Social Security applies an earnings test to beneficiaries who are working but have not yet reached their FRA. People who collect retirement, survivor or family benefits before reaching that milestone and who continue to work temporarily lose a share of their Social Security payments if their earnings exceed a certain level.
That threshold changes annually, based on wage trends. In 2027, beneficiaries who will not reach FRA until a later year will have $1 withheld from their Social Security payment for every $2 in work income above $25,560 (up from $24,480 in 2026). For example, if you earn $40,000 from work in 2027, your benefits for the year would be reduced by $7,220 — half the difference between $25,560 and $40,000.
The earnings test eases in the year you reach your FRA: Social Security holds back $1 in benefits for every $3 in earnings above $67,920 (up from $65,160 in 2026) until the month when you hit the milestone. At that point, the test goes away: There’s no longer any benefit deduction, no matter how much you earn, and the SSA adjusts your monthly payment upward so that you recoup the prior withholding over time.
There are different income rules for people receiving SSDI. Because disability benefits are intended for people who are largely unable to work for an extended period due to a serious medical condition, you can lose them if your earnings reflect what the SSA calls “substantial gainful activity.”
In 2027, that threshold is $1,770 per month for most SSDI beneficiaries, an $80 increase from the 2026 level of $1,690. People receiving SSDI due to blindness are subject to a higher income limit: $2,950 in 2027, $120 more than in 2026.
7. Qualifying for benefits
To qualify for Social Security retirement benefits, you need to earn at least 40 Social Security credits. You earn credits by doing work in which you pay Social Security taxes on your income. You can earn up to four credits a year, so most workers reach the eligibility threshold for retirement benefits after 10 years in the labor force.
In 2027, you will earn one credit for earnings of $1,970, $80 more than the 2026 level, so you bank your maximum of four credits when your work income for the year reaches $7,880.
The key takeaways were created with the assistance of generative AI. An AARP editor reviewed and refined the content for accuracy and clarity.
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