While many wait for Halloween in the month of October, Social Security recipients are waiting for a big announcement, the new Social Security cost-of-living adjustment, or COLA. The yearly COLA is meant to help retirees keep up with the rising costs of the economy. In October 2025, the government will announce the COLA for 2026.
There is a slight problem though, Medicare premiums are also expected to increase and unfortunately, that increase could take away most of the extra Social Security money. The reason for this is Medicare premiums are deducted directly from Social Security. For many retirees, that means their wallets won’t feel any heavier next year.
What the Social Security Raise Means
It’s important to note that Social Security benefits do not remain the same forever. Every year, it’s adjusted accordingly to keep up with inflation.
- For 2025, the COLA was modest compared to the record-high increases seen in 2022 and 2023.
- For 2026, experts expect the COLA to be around 2.7%.
That extra money can certainly help cover groceries, gas, or utility bills. But retirees should be careful not to celebrate too soon.
Medicare Premiums Are Going Up Too
Seniors who are enrolled in Medicare and receive Social Security automatically deduct their Part B payments from their monthly income. However, in 2026, Medicare Part B costs may increase. And seniors’ COLA will suffer if that occurs.
That means a retiree who gets a $50 COLA boost could see nearly half of it vanish before the money even hits their bank account.
Why Are Medicare Costs Rising?
Healthcare costs in the U.S. always increase. Some reasons for this include:
- More expensive medication and treatments coming into the market.
- The population is aging, and more and more people are relying on Medicare.
- As a result of inflation, hospital costs and staffing costs also increase.
Medicare is under more strain as a result of these circumstances, and seniors pay more premiums as a result.
What It Means for Retirees
The COLA may seem like a win; however, seniors will feel the impact of other increases:
- With 2.7% increase, a retiree with a $1,900 monthly benefit would get approximately $51.30.
- Their Medicare Part B premium goes up by approximately $20.
- Their Part D drug coverage rises by another $10.
That leaves them with just about $20 extra per month. This is barely enough to cover essential expenses such as groceries and utilities.
What You Can Do About It
Retirees can’t control the COLA or Medicare premiums, but there are a few steps that can help:
- Review your Medicare plan and see where you can save money.
- If you are a low-income earner, look into other support programs that will assist you apart from just Social Security.
- Make sure you budget properly. Cut out unnecessary expenses and make sure that your important expenses are covered.
- Look into other retirement savings to assist you build more income.
The Bottom Line
It is noted that Social Security benefits will increase next year, however, retirees will not see much of the increase. It is very likely that there will be increase in Medicare premiums and this will eat a large chunk of that COLA increase. Unfortunately, as a result of this, some retirees may not even see any increase at all.
The yearly COLA helps protect Social Security payments from losing value, but it’s not a guarantee of extra money in your pocket. Retirees should prepare for the fact that medical expenses will probably consume a large portion of their pay, plan ahead, and keep updated so that they can make wise financial decisions.