Why a 3.6% Social Security COLA in 2027 Could Feel Deceptive
Social Security recipients could see one of the larger benefit increases in years in 2027.
However, as financial advisor Erin Moriarty explained in a recent YouTube video, the increase you see announced isn’t necessarily the amount that ends up in your bank account.
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Before counting on a larger monthly check, it's worth understanding the factors that can quietly reduce how much of that increase you actually keep.
The Headline Number Sounds Better Than It Is
According to AARP, the projected cost-of-living adjustment (COLA) for 2027 sits around 3.6%. On a typical benefit, that works out to somewhere around $75 more a month.
"Feels pretty good, right?" Moriarty said. Then came the catch. "How much of that increase do you actually get to keep?"
Medicare Part B premiums climb every year. Prescription drug costs shift. High-income retirees face IRMAA surcharges on top of both. Moriarty was upfront that none of the 2027 figures are locked in yet, since the official COLA won't be announced until Oct. 14, and the Medicare numbers follow later that fall.
Medicare Takes a Bite Before the Money Ever Arrives
The standard Medicare Part B premium sits at $202.90 in 2026, projected to rise to roughly $209.50 in 2027 — an increase near 3.25%. That's growing slower than Social Security itself, but it still eats into the raise directly.
Moriarty ran the math on a $2,086 average benefit. A 3.6% COLA adds about $75.10 a month. Subtract the projected $6.60 Part B increase, and the retiree keeps closer to $68.50, before Part D or IRMAA even enter the picture.
"I am not saying that Medicare takes away your cost-of-living adjustment," Moriarty said. "It doesn't. It simply absorbs some of that gross increase before it ever hits your bank account."
Part D Has Three Separate Changes Coming
The Centers for Medicare and Medicaid Services (CMS) already confirmed two of the three Part D changes for 2027. The annual deductible rises to $700 — a 13.8% jump. The out-of-pocket cap climbs to $2,400 —up 14.3%. Once a retiree hits that cap, cost sharing drops to zero for the rest of the year.
Additionally, a temporary premium stabilization program ends after 2026. That could make individual plan premiums more volatile going forward. CMS confirmed the national base beneficiary premium at $41.33, though Moriarty pointed out that number alone doesn't determine any single person's actual bill. That's because individual plans can raise their own premiums well beyond the 6% cap that applies to the national figure.
IRMAA Works Like a Cliff, Not a Bracket
For higher earners, IRMAA (which stands for Income-Related Monthly Adjustment Amount) is where the real risk sits. Unlike a normal tax bracket, crossing an IRMAA threshold by even one dollar triggers the entire higher rate for that tier, not just the amount above the line.
Moriarty said a married couple filing jointly under $224,000 in income pays about $2,500 a year in combined Part B premiums. However, one dollar over that threshold and the bill jumps to roughly $3,750.
"That $1 costs about $1,200 a year per person, or about $2,500 per couple," she said.
IRMAA looks at your income from two years earlier, so your 2027 Medicare premiums would be based on your 2025 tax return. Of course, if your income has dropped because of a major life change, you may be able to ask Social Security to use your more recent income instead. You can do that by filing Form SSA-44.
The Decisions Aren't Isolated From Each Other
Roth conversions, required minimum distributions (RMDs), capital gains and the age you start claiming Social Security can all affect the same modified adjusted gross income number used to calculate IRMAA. That’s why Moriarty said it’s important to look at these decisions together rather than treating each one separately.
"These decisions are not made in isolation," she said. "You have to look at your entire retirement picture." A Roth conversion that triggers an $1,800 IRMAA surcharge in year two could still be the right call if it saves far more in lifetime taxes, she said.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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