On October 14, 2026, the Social Security Administration announced a 3.6% cost-of-living adjustment (COLA) for 2027. For the average retired worker, that is about $75 more a month, moving the average check from roughly $2,095 to roughly $2,170. The natural question for retirees is whether that raise is enough, and whether a dividend paycheck can do better.

To find out, this article models a hypothetical retiree with $500,000 on the first trading day of 2016 (January 4), spending every dividend and never selling a share. The money goes into five popular dividend ETFs, one at a time, with VOO as a yardstick. Each fund's yearly dividend raise is compared with that year's Social Security raise. It is a model built on published prices and dividend histories, not a real account.

Key Takeaways

  • Social Security's raises added about 35.5% from 2017 to 2026, and about 40% once the 2027 raise is included.
  • Over the same period, dividend paychecks grew about 151% (SCHD), 127% (DGRO), 100% (VIG), 80% (VOO), 67% (VYM) and 36% (SPYD).
  • DGRO beat Social Security's raise in all 9 years, including 2023's 8.7%, the only fund to do so.
  • SPYD started with the biggest paycheck but delivered roughly zero real raise in ten years and the smallest account.
  • SCHD's payout is up under 1% so far in 2026, a reminder that a dividend raise is earned each year while the COLA is automatic.
Disclaimer: this is education, not financial advice. Social Security figures are averages, dividend payouts can fall, and past performance does not guarantee future results.

How the Social Security COLA Is Calculated

The COLA is tied to one inflation measure, the CPI-W (the consumer price index for urban wage earners and clerical workers). The SSA compares the average for July, August and September with the same three months a year earlier, and the percentage change becomes next year's raise.

This year, the September CPI-W was up 3.9% from a year earlier and the broader CPI was up 3.7%. Averaged over the third quarter, that produced the 3.6% raise that starts in January. The SSA says about 72 million beneficiaries will see it.

By design, the COLA is backward looking: it pays for inflation that already happened. It also tracks the spending of working households, while retirees usually spend more of their budget on health care and housing. When medical costs or rents rise faster than everything else, a retiree's real cost of living can climb faster than the raise.

Part of the raise may also vanish before it arrives. The Medicare trustees projected the standard Part B premium could rise from about $202.90 a month in 2026 to about $209.50 in 2027. That is a projection, not the official number, which usually comes in November. If it lands there, almost $7 of the $75 raise goes straight to Medicare.

Every Social Security Raise Since 2017

The yearly COLAs were: 2017, 0.3%; 2018, 2.0%; 2019, 2.8%; 2020, 1.6%; 2021, 1.3%; 2022, 5.9%; 2023, 8.7% (the biggest in about 40 years); 2024, 3.2%; 2025, 2.5%; 2026, 2.8%; and 2027, 3.6%.

Compounded, a $2,000 monthly check in 2016 became about $2,710 in 2026, and about $2,807 in 2027. That is the bar: about 40% over eleven years, delivered automatically by law.

Dividend ETF Dividend Growth vs COLA: Fund by Fund

A dividend raise is not guaranteed. Companies raise payouts when profits allow, and they can cut them. That is the trade for a chance at a bigger raise.

SCHD: the best ten-year raise

The Schwab U.S. Dividend Equity ETF (SCHD) owns about 100 companies with at least ten straight years of dividends and costs 0.06% a year. In 2016, $500,000 paid about $16,500, or about $1,375 a month. Its raises beat Social Security in 8 of 9 years, including about 19% in 2019 and about 18% in 2020 against COLAs of 2.8% and 1.6%. The exception was 2023, when SCHD grew only about 3.8% against the 8.7% COLA.

Over the last twelve months SCHD paid about $41,500, roughly 151% more than year one, which is about $3,457 a month from the same shares. The account is worth about $1,346,000. The honest part: in 2026, through three quarterly payments, SCHD paid about 77.5 cents a share versus about 76.9 cents in the same period last year, a raise under 1%, even though its price is up more than 20%. Its payout per share has still grown about 10.5% a year over ten years. For more on this slowdown, see DGRO vs SCHD: The Dividend Growth Stall Investors Need to See.

VIG: low start, steady growth

The Vanguard Dividend Appreciation ETF (VIG) yields the least, about 1.5%, and costs 0.04%. In 2016 it paid about $11,900 ($992 a month). Its raises beat the COLA in 8 of 9 years, missing only 2023 by a little (about 8% against 8.7%). Over the last twelve months it paid about $23,800, a 100% raise against Social Security's 35.5%, and the account is worth about $1,573,000.

DGRO: beat the COLA every year

The iShares Core Dividend Growth ETF (DGRO) costs 0.08% and paid about $12,970 in 2016. Its paycheck beat Social Security in all nine years. In 2023 it rose about 12.7% against the 8.7% COLA. Over the last twelve months it paid about $29,500, about 127% more than in 2016, and the account is worth about $1,552,000.

VYM: momentum faded

The Vanguard High Dividend Yield ETF (VYM) paid about $16,700 in 2016 and had strong early raises of about 9%, 10% and 7%. Then 2024 brought about half a percent and 2025 about two tenths of a percent, against COLAs of 3.2% and 2.5%. It beat Social Security in 5 of 9 years, paid about $27,900 over the last twelve months (about 67% more than year one), and the account is worth about $1,211,000. Check the trend, not just the total.

SPYD: the high-yield trap

The SPDR Portfolio S&P 500 High Dividend ETF (SPYD) paid about $26,100 in 2016, more than double VIG. But its paycheck fell in four of nine years, including nearly 8% in 2023, and beat the COLA only four times. Over the last twelve months it paid about $35,500, about 36% more than year one. The account is worth only about $806,000.

VOO: the yardstick

VOO is not a dividend fund and yields about 1%, so $500,000 paid only about $11,200 in 2016. Yet its raises beat Social Security in 7 of 9 years, its payout is up about 80% to about $20,150, and its account grew to about $1,914,000.

The Real Raise After Inflation

Stripping out Social Security's raise shows how much more each retiree can actually afford than in 2016: SCHD about 85% more, DGRO about 68%, VIG about 47%, VOO about 32%, VYM about 23%, and SPYD about the same, a zero real raise in ten years.

SPYD does come out on top for total cash collected over the decade (about $326,000, versus about $311,000 for SCHD), but SPYD's account is about $806,000 against SCHD's about $1.35 million. Add the cash and the account together and SCHD is ahead by more than half a million dollars.

Stress Tests: Starting in 2020 and 2022

A retiree starting January 2020, just before the pandemic crash, saw Social Security's raises add about 27% (about 31% with 2027). VIG's paycheck grew about 59%, SCHD's about 56%, DGRO's about 45% and VOO's about 40%, all ahead. VYM's grew about 26.5% and SPYD's about 26%, a little behind.

The toughest start was January 2022, before the inflation surge. Social Security's raises added about 18% (about 22.5% with 2027). DGRO's paycheck grew about 28%, VOO's about 25%, SCHD's about 23.5% and VIG's about 23%. Once the 3.6% raise lands, SCHD and VIG are only about even with it. VYM grew about 13% and SPYD about 4%.

The reason is that the two raises are driven by different things. The COLA follows prices, so it jumps a year after inflation does. Dividends follow company profits, which catch up over time. Over a long stretch the right dividend funds beat the COLA comfortably, but after an inflation shock the automatic raise is hard to beat.

Combining Social Security and a Dividend Paycheck for Retirement Income

For most retirees it is not either-or. Take the average Social Security check of about $2,170 a month plus $500,000 split equally among SCHD, VIG and DGRO. That blend paid about $13,800 a year in 2016 and about $31,600 over the last twelve months, a raise of about 129%, or about $2,630 a month. Total monthly income is about $4,800.

Next year the Social Security part rises about $75 a month. Giving the dividend half the same 3.6% would take about $1,140 a year in extra payouts; at SCHD's ten-year pace of about 10.5% it would be closer to $3,300, and if the funds paused like SCHD this year, close to nothing. Social Security is the floor, and the dividend blend is the engine. A retiree with a $2,000 Social Security check in 2016 plus the blend had about $37,800 of income that year and about $64,100 over the last twelve months, a combined raise of about 70%.

Add a cash floor for flat years: about a year of dividend income, roughly $30,000, in a Treasury bill fund like SGOV, which pays about 3.6% today. If dividends stall, spend from the floor and refill it later. For a related approach, see the 3-bucket dividend strategy.

With $250,000 in the same blend, the 2016 paycheck would have been about $6,900 and the last twelve months about $15,800 (about $1,320 a month). With $100,000, about $2,760 in 2016 and about $6,300 now. Taxes matter too: for tax years 2025 through 2028 the IRS allows an extra deduction of up to $6,000 for people 65 and older ($12,000 for a couple if both qualify), phasing out above $75,000 of modified adjusted gross income for single filers and $150,000 for joint filers. Qualified dividends are also taxed at lower rates than wages for most retirees.

Is the 3.6% Raise Enough?

On its own terms, the COLA is designed to be exactly enough: it matches the past year's inflation as measured by one index. It can never get you ahead. A dividend paycheck can, but promises nothing. The lessons from ten years: starting yield is the wrong thing to shop for; steady growers won; no fund wins every year; look at the trend; and the account matters too, since every steady grower more than doubled the retiree's money while paying every dividend.

Watch the Full Video

For a visual walkthrough of every chart and year-by-year comparison, watch the full video on YouTube. To see how to build a dividend plan that survives a bad first year of retirement, watch the next video, Retiring at 60? The Dividend Plan That Survives a Year-One Crash. How much of your retirement income gets a real raise each year? Tell us in the comments.