Every year, Social Security recipients wait for an important announcement about what their benefits will be the following year. This is referred to as the Cost-of-Living Adjustment (COLA) announcement. The COLA helps retirees keep up with the rising costs of the economy. Now that the 2026 COLA has been announced, it’s important to understand all that factors that go hand in hand with this increase.
Yes, the increase is meant to help retirees keep up with expenses, but with that increase, Medicare Part B premiums is also increasing. This will unfortunately split retirees into two groups, those who will see the 2.8% COLA increase and those who are enrolled in Medicare programs who may see a much smaller amount.
The reason for this is because Medicare Part B premiums is deducted directly from Social Security benefits.
The COLA Looks Good On Paper
The COLA is calculated based on inflation data and is meant to help retirees keep up with the rising costs of inflation. Since many retirees live on fixed incomes, every little bit counts especially for housing, groceries and utilities.
However, it’s important to look at other deductions such as Medicare Part B premiums, because this lowers the final Social Security benefit amount.
Medicare Premiums are Increasing Significantly
Understanding Medicare is the first step. Medicare is a program which covers basic doctors visits, outpatients as well as medical supplies. The increase in Medicare Part B premiums is significant because it is deducted directly the from Social Security check.
The sad reality is that when Medicare premiums increase, beneficiaries won’t see much of an increase on their Social Security checks.
This isn’t something that’s new and has been happening over the years.
The Divide: Two Groups
The first group of retirees are the beneficiaries who keep most their COLA increase. The inclusion criteria for this group is:
- All those retirees who are not on the Medicare program
- Retirees who are a part of the Medicare Advantage plans, as the premiums for these programs do not increase as sharply as Medicare Part B premiums
- Higher-income retirees less affected by the “hold harmless” rule
This group of people may actually see the 2.8% COLA increase. For all those living on fixed incomes, this makes a difference.
The second group of people are the ones who are enrolled in Medicare Part B programs and see their increase eaten up by these premiums. The affects:
- Retirees enrolled in Medicare Part B programs
- Retirees who rely fully on Social Security benefits each month
- All those beneficiaries who benefits are much lower and cannot cope with the increase in premiums
Unfortunately for these retirees, they may see the increase on paper but the final amount of benefits they receive is much lower than expected. This may not make a difference at all to their budget.
The Problem With The COLA Calculation
Many experts have voiced their concerns about the way in which the COLA is calculated. They have concluded that the calculation does not reflect the accurate spending pattern of the senior population, but rather looks at the spending pattern for working class individuals. Seniors spend a greater amount of their finances on healthcare, medication, housing and groceries.
The cost these are increasing much faster than the overall rate of inflation, therefore even though there is a COLA increase, many retirees are not able to keep up.
At The End of The Day
Since there are millions of Americans who rely on Social Security, the COLA was meant to help them keep up with the rising costs of the economy. However, for those who are enrolled in Medicare Part B programs, the COLA increase may be eaten up by Part B premiums.
Therefore, retirees are split into two groups, those who will be able to see increase and those who will barely see or perhaps see no increase at all.