NOVEMBER 3, 2026 – Every year, the Social Security cost-of-living adjustment (COLA) helps retirees keep up with rising prices. But for military retirees, disabled veterans, survivors, and their families, the newly announced 3.6% COLA for 2027 is a bigger deal than usual. It’s the largest annual increase since 2023, and it touches several of the income streams you count on each month.
So rather than treating it as just another line on your January statement, use it as a chance to take a fresh look at your financial priorities.
What the 3.6% Increase Means for You
The COLA reaches well beyond Social Security. Here’s what else goes up in 2027:
- Military retired pay increases 3.6%, whether or not you’re drawing Social Security yet.
- VA disability compensation, pension, and Dependency and Indemnity Compensation (DIC) all increased 3.6%, matching the Social Security COLA.
- Survivor Benefit Plan (SBP) annuities for surviving spouses also rise 3.6%.
These increases add up. Say you receive $4,000 a month in military retired pay and $2,000 from Social Security. A 3.6% increase on both comes to an extra $216 a month, or $2,592 over the year. That can make a real difference, and it’s even more if you also receive VA disability compensation.
One note: your take-home increase may be a little smaller than the headline number. Military retired pay is taxable, and if you’re on Medicare, your Part B premium is usually deducted from your Social Security check, so keep an eye out for the 2027 premium when it’s announced.
How Does This Year’s COLA Stack Up?
In historical terms, 3.6% is a healthy bump. Over the past 20 years, only three COLAs have been larger: 5.8% in 2009, 5.9% in 2022, and 8.7% in 2023.
Of course, there’s a reason for the increase in size. The COLA is based on how much consumer prices rose between the third quarter of 2025 and the third quarter of 2026. So yes, you’re getting a nice raise in 2027, but it’s designed to keep pace with what you’re already paying at the grocery store, the gas pump, and the pharmacy, not to necessarily get you ahead.
The smart move is to figure out how much of that extra money will be absorbed by everyday costs and how much, if any, is left over to save.
Budgeting for 2027
The last couple of months of 2026 are a great time to map out your household budget for the coming year. That might sound overwhelming, but if you break it into manageable pieces, it’s very doable. Here’s one way to approach it:
- Step One: Estimate your monthly income for 2027 with the 3.6% COLA built in.
- Step Two: Look at what you’re actually spending. Average a few months of expenses to get a realistic monthly figure, and compare it with your expected income.
- Step Three: Decide how much of the increase will cover rising day-to-day costs and how much will go toward bigger obligations like your mortgage, rent, or car payment.
- Step Four: Check your emergency fund. A good target is three to six months of expenses set aside for the unexpected. If you’re short, direct some of your increase there.
- Step Five: Tackle high-interest debt. If you carry credit card balances, put part of your increase toward paying them down. High interest charges can quickly eat up the value of your raise. Paying off debt isn’t fun, but it’s one of the best things you can do for your long-term financial health.
Turning Your COLA into Lasting Financial Stability
Your COLA doesn’t have to be just another routine adjustment. It’s a natural moment to update your budget and take an honest look at your spending habits. Every veteran’s situation is different, so there’s no one-size-fits-all plan.
If you’re already financially comfortable, consider putting the extra money toward savings or longer-term investments. If things have felt tight, use the added breathing room to get your spending on firmer footing.
Whatever your situation, the key is to be intentional. Decide where your increase will go before it quietly disappears into everyday spending.
By Michael Meese, President of Armed Forces Mutual