Each year since 1975, all benefits issued by the Social Security Administration (SSA) undergo an increase aimed at countering the effects of growing inflation rates. This increase is called the Cost of Living Adjustment (COLA) and the SSA makes its official COLA announcement annually in October. The COLA is determined by measuring CPI data for the third quarter year over year. When there is an increase from the previous year to the current year, all benefits will be adjusted accordingly for the upcoming year. In 2025, all beneficiaries of the Social Security program received a modest 2.5% increase to their benefits.
Following some minor delays due to the federal government shutdown, the SSA officially announced the 2026 COLA on October 24th. Starting with the January 2026 round of payments, all benefits will receive a 2.8% increase. This increase will not likely have come as a surprise to seniors across the country as the latest projections prior to the announcement estimated a COLA of 2.7%. The average retiree benefit currently amounts to around $2,008 and as such, the 2025 COLA increase will equate to around $56 more on average.
While $56 is technically the amount by which the average retiree check will be increased, most seniors will really only see around $38 more in their benefits in January. Here is reason behind this COLA cut.
Medicare premium hike
The 2026 COLA boost may be higher than that of 2025, however, its value will be slashed before benefit checks even reach the bank accounts of recipients. The reason the COLA increase may seem lower than it should be is because Medicare Part B premiums are also projected to increase rather substantially in the new year. Medicare is a federal health insurance program for seniors aged 65 and older. When you claim Social Security, you will also likely be enrolled into Medicare Part A and Part B. The Part A premium, which covers hospital care, typically has no cost attached to it. The Part B premium which covers medical insurance, on the other hand, does have a cost attached to it.
Furthermore, the cost for the Part B premium is generally deducted automatically from the Social Security benefit. The cost of the Part B premium currently sets seniors back by $185, however, when the increase comes into effect next year, the premium will cost $202.90 per month. Since the premium is automatically deducted from Social Security benefits, once the COLA increase and the premium hike offset each other, the average retiree will only see around $38 more in their benefits despite actually receiving the $56 average COLA increase.
In terms of dollar increases, the Part B premium will be increasing by $17.90, as per a November 14th fact sheet from the Centers For Medicare and Medicaid Services. This will be the second highest Medicare Part B premium hike in history, with the highest increase totaling to $21.60 in 2022. Predictions made earlier in the year by Medicare Trustees estimated a Part B premium increase of $21.50, so while the increase is lower, beneficiaries will still be losing out on their COLA increase — particularly lower-income households.
The hold harmless provision
The $56 COLA boost is relative to the average retiree benefit of $2,008. Since Social Security is determined in relation to your lifetime earnings, lower-income households will be receiving smaller benefits, which then translates to smaller COLA increases. For instance, if someone is only receiving $600 in benefits monthly, their COLA increase would only amount to $16.80 per month. The Part B premium hike is an additional $17.90 from your monthly benefit. When the two increases offset each other, the beneficiary will actually be losing out on $1.10 per month.
“A Part B increase of this size would trigger the hold harmless provision for Social Security recipients with a Social Security benefit of $640 or less,” said Mary Johnson, an independent Social Security and Medicare policy analyst. “Without that hold harmless provision, the increase in Part B would swallow the entire COLA for someone receiving a very small monthly Social Security check.”
The hold harmless provision protects your Social Security benefit payment from decreasing due to an increase in the Medicare Part B premium, as per the SSA. “Under the hold harmless provision that applies to some beneficiaries, the increase in Medicare Part B premiums is limited to the dollar amount of a recipient’s COLA,” TSCL executive director Shannon Benton explained.