Social Security's 3.6% COLA and the Real Risks of Dividend ETFs

Social Security benefits will rise 3.6% in 2027, adding about $75 a month to the average retired worker's payment, the Social Security Administration said on October 14. Dividend-focused exchange-traded funds can add portfolio income, but their distributions are market-linked and should not be treated as a substitute for the guaranteed cost-of-living adjustment.

What the COLA changes

The average retired worker benefit is expected to increase from about $2,095 to $2,170 a month. The adjustment begins with January 2027 benefits and is based on the change in the CPI-W inflation index from the third quarter of 2025 through the third quarter of 2026.

The gross increase is not necessarily the amount a beneficiary keeps. The standard Medicare Part B premium is usually deducted from Social Security payments. The 2026 Medicare Trustees Report projects a 2027 standard premium of $209.50, up $6.60 from 2026, but CMS had not issued the final 2027 Part B rate when this article was prepared.

Three funds, three different income engines

The source report calculated that $100,000 invested at its stated prices would have generated about $7,992 from JEPI, $3,075 from SCHD and $2,772 from FDVV over the trailing 12 months. Those are historical cash distributions based on a specific price and measurement window. They are not promised yields, and a different purchase date produces different results.

JEPI seeks monthly income from stock dividends and an options overlay. Option premiums can lift cash payouts and dampen volatility, but selling calls can also limit participation in a fast-rising market. JPMorgan states that the fund distributes monthly income from dividends and options premiums. Its October 2026 payment was $0.34134 a share, down from $0.37142 in the previous month.

SCHD and FDVV follow more traditional dividend-stock approaches and generally pay quarterly. Schwab's official history shows SCHD paid $0.2665 a share in September, up from $0.2525 in June. FDVV paid $0.362 a share in September, below its previous $0.519 payment. The quarter-to-quarter changes show why a trailing total should not be converted into a fixed monthly budget.

Income is not the same as return

A fund can make cash distributions while its share price falls. Taxes, account type and the character of each distribution also affect what an investor keeps. JEPI's higher historical cash payout comes with an options strategy and potentially less upside; SCHD and FDVV offer lower trailing income but more direct exposure to dividend-paying equities.

The practical comparison begins with spending needs and loss tolerance, not the largest payout. Social Security's COLA is an inflation adjustment to a federal benefit. ETF income is compensation for taking market risk, and both the cash payment and the principal value can change.