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Every year, Social Security benefits are adjusted to account for inflation. We will get the official word on how big the Cost of Living Adjustment (COLA) will be for 2027 in the middle of October. The expectation is that benefits will rise 3.6%.

As I have explained before, the fact that Social Security benefits rise along with inflation makes it such a valuable piece of your retirement income planning. Most pensions do not include an inflation adjustment, and you know that there’s no automatic, guaranteed inflation adjustment for your personal retirement investments.

Now a 3.6% increase is indeed good news. But I need all of you who are enrolled in Medicare to understand that your Medicare out-of-pocket costs in 2027 are likely to increase. We won’t know exactly how much until later in the fall, but there are some solid estimates.

For starters, most everyone pays a monthly premium for Medicare Part B coverage. In 2026, the base monthly per-person premium is $202.90. Individuals with high incomes pay an even higher monthly premium for Part B, which covers out-of-hospital care such as tests and doctor visits.

The expectation is that the base premium cost will rise by  $6.60 to $209.50 per month. The annual deductible for Part B is also expected to rise next year, from $283 in 2026 to $292 in 2027. Granted, that’s “just” a $9 increase for the entire year, but it’s yet another added expense.

And I want everyone to be prepared to pay more for prescription drug coverage through Medicare Part D. Premiums for stand-alone Part D plans (for people enrolled in Original Medicare who must buy this coverage separately) are expected to rise in 2027, as the federal government has announced that its subsidies for Part D that have been in place for the past two years will not continue in 2027. (If you have Medicare Advantage, your prescription drug coverage is part of your coverage.)

And both Original Medicare and Medicare Advantage enrollees face additional costs for prescription drugs in 2027. This year, the maximum out-of-pocket cap for what you must cover in drug costs is $2,100 per person. That is expected to rise to $2,400 next year. And the maximum deductible any Medicare enrollee must pay for drug coverage is expected to rise to $700 from the 2026 limit of $615.

I will provide a detailed update of Medicare costs in a future newsletter, when we get all the final details for 2027. But in the meantime, I want you to know that the Social Security COLA is always the first bit of news that is released—it will be October 14th this year—but it’s just part of the story. If you are also enrolled in Medicare, it is likely that a good portion of an increased 2027 Social Security benefit may be used to pay higher Medicare out-of-pocket costs.

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    Categories: Retirement, Social Security