Every year, the government goes over inflation and decides whether benefits need to be increased, this is done through the Cost-of-Living Adjustment (COLA). The goal is simple: help seniors keep up with rising prices.
The government has now confirmed that a raise is on the way. That’s good news, but there’s a twist, you may not actually see the full increase in your bank account. Some of it could get eaten up by healthcare costs, taxes, or other deductions.
How Social Security Decides on Raises
The Social Security Administration (SSA) looks at the Consumer Price Index (CPI), which measures changes in everyday prices like food, gas, and housing. If inflation is high, benefits go up.
Prices have been rising this year, and a new COLA rise has been initiated by the SSA. Checks will thus start to become larger in the early months of next year.
For example, if you currently receive $1,800 a month and the COLA is 3%, you’d get an extra $54 each month. Over a year, that adds up to more than $600, money that can help cover essentials.
Why You May Not Get the Full Raise
If you are 65 or older, there is a great chance that your Medicare Part B premiums are deducted straight from your Social Security benefits. The premium for 2026 is expected to increase by approximately 11.6%. That means an average hike of about $21.50 per month.
In addition to this, COLA is expected to be approximately 2.7% which works out to about $54.18 more per month for the average recipient. Unfortunately, the higher Medicare premiums will offset nearly 40% of that increase, leaving retirees with far less of the raise in their pockets.
Retirees living on a fixed income may feel the knock of this. It is important start preparing from now.
Who Will Benefit the Most?
Some retirees will see more of the raise than others.
- If you’re not yet enrolled in Medicare, you’ll likely get the full amount of the increase.
- If your Medicare premiums stay the same or rise only slightly, you’ll also notice more of the COLA.
What You Can Do Right Now
You can’t control inflation, but you can prepare for how the raise affects you. Here are a few steps to take:
- Keep an eye out for Medicare updates: Make sure you are aware about next year’s premiums as this impacts your Social Security check.
- Plan your budget carefully: Make sure you plan your budget accordingly to avoid unforeseen expenses.
- Look for extra help: Programs are available to assist with Medicare payments and medication costs if the costs become too much to bear. Checking to see if you qualify is worthwhile.
Why This Matters
The Social Security increase shows that the system is working as it should. However, the increase in healthcare costs outweighs the COLA increases and this leaves retirees struggling.
Even though many people rely on this, the raise isn’t something to bank on. This serves as a reminder of the importance of planning your finances carefully.
Bottom Line
It is important for retirees not to rely on this increase as much as it may seem like good news. Medicare deductions may offset the increase before it even reaches your bank account.
The best course of action is to get ready now; learn how the increase works, what deductions you are eligible for, and budget for the actual amount you will get. In this manner, the rise might still have a significant impact on your retirement. Be sure to keep updated with verified information and plan smartly!