Ramsey Solutions Says Your Social Security COLA Isn't a Raise - Here's What to Do With It

Social Security beneficiaries will receive a 3.6% cost-of-living adjustment (COLA) in 2027. The increase will add an average of $75 a month to retirement benefits, bringing the estimated average monthly benefit for retired workers from $2,095 to $2,170.

Ramsey Solutions cautions that extra COLA cash isn't a raise. It's a buffer against rising prices. A larger check doesn't necessarily mean more purchasing power. The COLA is designed to help benefits keep pace with inflation, and the latest price data show that household expenses remain a concern. For retirees living on a fixed income, the key question is how far that additional money will go after essential costs are paid.

If you want to be as stress-free as possible while living on Social Security, see below how you can make the best use of that increase.

Editor's note: Social Security and COLA data come from the Social Security Administration. Inflation figures come from the BLS. Medicare data comes from the Centers for Medicare & Medicaid Services.

Recognize the COLA for what it is

The COLA isn't designed to improve your financial situation. Its purpose is simply to prevent it from deteriorating. Even with a 3.6% increase in 2027, your personal expenses could rise faster than your benefit, especially if housing, food, transportation, or health care take up a large share of your income. As of September 2026, inflation is already outpacing the upcoming COLA adjustment at 3.7%

Treat the adjustment as one part of your income plan, not a reason to assume your budget has more breathing room. Review your actual expenses before deciding whether the increase can go toward savings, discretionary purchases, or bills that have become harder to manage.

Do a budget audit before making any changes

Before you adjust your spending, make sure you track what your actual expenses were over the past 12 months. Grocery, housing, and healthcare costs tend to rise faster for older Americans than national averages suggest.

If your personal cost increase is outpacing 3.6%, the COLA hasn't left you ahead. Instead, it's only reduced how much ground you are losing. You need to know your real numbers before you can make any significant changes to your budget.

Direct the increase toward your financial cushion

If, when you do your budget, your expenses are covered, the most practical use of the COLA increase is to direct it toward an emergency fund rather than discretionary spending.

Ramsey recommends keeping three to six months of expenses in accessible savings when possible. A small, consistent addition to that savings account builds a meaningful buffer over time, especially heading into years when the COLA adjustment may be even smaller.

Check what Medicare Part B takes first

If you're enrolled in Medicare, Part B premiums are automatically deducted from your Social Security check. In 2027, the standard premium is projected to rise to $209.50 per month, up $6.60 from $202.90 in 2026. That single increase wipes out a chunk of your COLA increase before it arrives. 

Understand why the COLA calculation works against retirees

COLAs are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which tracks spending for working-age people, not retirees. Seniors typically spend a larger share of their income on health care than the CPI-W reflects. Advocacy groups have pushed for a senior-specific Inflation Index for years. No change has been enacted, so retirees should expect COLAs to routinely underestimate their real cost increases.

Know that inflation has already overtaken the 2026 adjustment

The 2026 COLA was 2.8%, but the latest inflation data show that prices have continued to rise faster than that adjustment. In September 2026, the Consumer Price Index for All Urban Consumers (CPI-U) was up 3.7% from a year earlier, while the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) rose 3.9%.

Energy prices climbed 20.4% over the 12 months ending in September, and gasoline prices rose 34.2%, according to the Bureau of Labor Statistics (BLS). Those increases can put additional pressure on retirees who rely on their cars or spend a significant share of their income on utilities and other essentials.

The comparison helps explain why a COLA may not feel like a meaningful raise. When prices rise faster than benefits, a monthly check may cover less than it did a year earlier. Individual experiences will vary depending on spending habits and where someone lives, but retirees should compare their own expenses with their benefit increase rather than assume the adjustment fully offsets inflation.

Consider part-time work or a lower-cost location

For retirees whose budgets are particularly squeezed between the COLA and actual prices, finding part-time work to supplement their income could be a good solution as long as health and circumstances allow.

Alternatively, some retirees consider moving to a location with an overall lower cost of living. Both of these options reduce dependence on the annual COLA and give retirees more direct control over their retirement budget.

Build retirement income that doesn't depend on Social Security

More than a third of men and nearly half of women over 65 rely on Social Security for at least half of their income. Without Congressional action, Social Security trustees project the program may not cover full benefits past Q4 2032.

Ramsey recommends investing 15% of your household income for retirement, starting with a 401(k) match and then a Roth IRA. The idea is that the less you have to depend on the COLA, the less damage it does to your retirement plan when it falls short.

Bottom line

Social Security's 2027 COLA will increase benefits by 3.6%, adding an estimated $75 a month to the average retirement benefit. But the adjustment doesn't guarantee that retirees will gain purchasing power. September inflation was 3.7% for the CPI-U and 3.9% for the CPI-W, with energy and gasoline prices rising even faster.

The reminder that the COLA is a maintenance tool at best is important for retirees to keep in mind. Plus, of course, right now, the 2026 COLA has fallen well below current inflation. The smarter move to protect your retirement plan is to reduce how much it depends on Social Security in the first place.

Paying off debt before leaving the workforce, building tax-advantaged savings, and finding income sources outside government programs are steps that can change your financial picture in retirement. A stronger personal finance foundation means a below-average COLA affects your life far less.

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