Higher social security payouts for Americans in 2027 may put the retirement programme at risk — Here’s how

United States President Donald Trump’s policies have driven inflation higher and increased potential social security payouts for Americans in 2027 threatening the country’s retirement programme, according to an analysis by The Motley Fool.

In fact, it reported that the next projected payout in 2027 would be the fifth highest increase over the past 36 years in the US.

Notably, social security pay in the US is calculated using cost-of-living-adjustment i.e. COLA — which estimates peg would range between 3.7-3.8% in 2027, as per the report. However, while this means more money in the hands of beneficiaries, higher payouts also drain the fund’s reserves much faster than originally forecast, putting the retirement programme at risk, it added.

US Social Security payouts reaching new highs

According to the report, the retirement programme is making history over the recent past. In 2025, for example, average monthly benefits exceeded $2,000 for the first time since the law was signed into existence in August 1935 — about 90 years.

And in 2027, these payouts are projected to increase even more, again making history, thanks in large to COLA, which is applied annually to help beat inflation. For 2026, beneficiaries got 2.8% hike due to impact of Trump’s trade and tariff policies on the US economy. But, next year, given announcement of new tariffs by Trump and the US-Iran war, inflation is expected to be even higher — ergo higher COLA, and bumped out payouts.

The Senior Citizens League has estimated COLA of 3.8% in 2027, while Mary Johnson, a Social Security and Medicare policy analyst has forecast increase of 3.7%. Either number would be the fifth-largest raise over the last 36 years.

Prior to this, bigger COLA was recorded in 2023 (8.7%), 2022 (5.9%), 2009 (5.8%) and 2006 (4.1%).

Social security programme faces existential risk

The report cautioned that while beneficiaries may welcome the bigger monthly cheques, there will be a significant drain in funds that could push the programme towards deterioration.

Requirement for the US Social Security programme (unfunded obligations) over the long-term (75 years) has rocketed to $29.3 trillion, the latest report from the Social Security Board of Trustees showed, as per the report. This means that by 2100, the expenses incurred (for payouts, maintenance and administration) will exceed income collected by $29.3 trillion, it added.

The Social Security Board of Trustees report also raised concerns over estimated depletion of the Old-Age and Survivors Insurance trust fund’s (OASI) asset reserves by Q4 of 2032. To make up for this, benefits would have to be cut by 22%, it said. The OASI reserves are excess income collected since inception and invested by law in special-issue, interest-bearing, government bonds.

The sword of Damocles hanging over the numbers however remains that the above depletion calculations are based on average COLA increase, not the likely 3.7-3.8% hike which could come in 2027.