Once a year, all benefits issued by the Social Security Administration (SSA) undergo an increase relative to year over year inflation hikes. This increase is known as the Cost of Living Adjustment (COLA) and it has been automatically implemented since 1975. Prior to that, any increases to benefits as a result of high inflation rates required approval from Congress, and as a result, benefit increases were implemented at random. In 2025, all benefits received a 2.5% increase. Last month on October 24th, the SSA made the official 2026 COLA announcement where it was revealed that all benefits will receive a 2.8% increase starting in January 2026.
Whilst the COLA increases is given to all 75 million beneficiaries of the Social Security program, some recipients will not likely see much of a change to their benefit check come January. Here is what you need to know.
What does a 2.8% COLA increase mean for retirees?
The aim of the annual COLA increase is to ensure that the all benefit checks retain its buying power in the face of rising costs. For a household reliant on a fixed income, this increase has the potential to make or break their monthly budgets when inflation hikes strike. The average retiree benefit currently totals to around $2,008, which means that the average COLA increase will add around $56 to the monthly benefit.
Your benefit is primarily determined in relation to your lifetime earnings and as such, higher earners receive larger benefits, whilst lower earners may only be earning the average amount, if not lower than that. Since the COLA is a percentage increase, the same logic will apply as well. As a result, the COLA often falls short in fulfilling its purpose, particularly for lower income earners.
Medicare premium hike
Seniors aged 65 and older also qualify for Medicare coverage, which is a federal health insurance program. There are several coverage plans available with varying benefits and costs. The Part A premium covers hospital care and does not typically have a cost attached to it. The Part B premium covers medically necessary services, as well as preventative care and services, with a cost attached to it. Retirees currently pay $185 for the Part B premium and this is automatically deducted from their benefit checks. In 2026, however, the cost of this premium will be increasing by 9.7%, bringing the total up to $202.90. The annual Part B deductible is also set to increase from $257 to $283, increasing the initial financial burden for beneficiaries.
“That’s the second-highest Part B premium increase in program history,” Social Security and Medicare policy expert Mary Johnson said, further adding that “the 9.7% increase stands in stark contrast to the far more modest COLA scheduled for next year.”
“Hold harmless” provision
Not only is this premium hike the first time that the cost exceeds the $200 threshold, it also means that $17.90 of the COLA increase will be eaten away before benefit checks even reach their recipients. In the case of retirees earning below the average, their whole COLA increase could potentially be lost. In these cases, Medicare’s “hold harmless” provision will apply. “Medicare’s “hold harmless” provision limits the rise in Medicare Part B premiums deducted from Social Security benefits to no more than a given year’s COLA, but that means many seniors get their COLAs merely reduced instead of overtaken altogether,” as per TSCL.
Whilst the “hold harmless” provision is meant to provide beneficiaries with protection from having their benefits reduced as a result of these premium hikes, eligibility is somewhat limited, and will “not apply to beneficiaries who are new to Medicare or those whose income is high enough to pay more than the standard premium,” as per advocacy group TSCL.