Many many people receive benefits from Social Security and they can’t wait for next year. I mean, current projections show that the cost of living adjustment for 2026 could be 2.7%, which might seem like great news at first sight since COLA’s goal is to help retirees maintain their purchasing power against inflation.
However, even though the increase is good in theory, many retirees could not notice a great difference in their pockets, which might seem unfair for many people, right? Well, the reason for this is because Medicare premiums and other related costs increase with inflation could reduce an important part of that increase. So, let’s learn more about this.
Amount of your Social Security increase
According to Social Security data from the month of August of 2025, the average monthly payment for retirees was $2,008. If the projected 2.7% increase takes effect, that would mean about $54 more each month. In simple terms, someone who now receives $2,008 a month could see their payment rise to around $2,062.
However, this amount only shows the total increase before deductions. After Medicare premiums and other expenses are taken out, the real raise retirees receive will likely be much smaller.
Why you could not receive the entire increase
One of the main reasons why the increase of Social Security COLA could be reduced is Medicare Par B, because Medicare Part B premiums directly discount most of the Social Security payments. This is why if these premiums increase, the increment of your COLA is automatically reduced.
In 2025, the standard Medicare Part B premium went up from $174.70 to $185.00, and it is expected to rise again in 2026 — possibly reaching $206.50 each month. That is $21.50 more than last year.
If that happens, retirees receiving the average benefit might not keep their entire $54 COLA increase. After the larger Medicare deduction, their raise could drop to only about $32.50 a month, cutting almost 40% of the increase.
Other costs
Wait, because Medicare is not the only factor that can affect your increase… There are other automatic deductions that can reduce your total benefit, so let’s have a look at them:
- Supplemental coverage payments
- State taxes
- Additional health insurance plans
Apart from all of these other costs, inflation keeps making basic products, health services, and food more expensive. Even though the COLA increments aim to compensate for those higher prices, they are based on general price changes, not on the specific costs retirees face. That means even after the adjustment, many people may still struggle to cover higher medical or living expenses.
Don’t depend only on COLA
Depending only on increments of Social Security COLA to maintain the purchasing power is risky because, as current projections show, even a good increment can be absorbed by Medicare premiums and other costs.
So, the best thing to do to maintain a stable financial situation is to consider other sources of income that do not depend only on Social Security such as investing in stocks or bonds, holding dividend-paying investments, or exploring other forms of supplemental income.
Final announcement
The Social Security Administration (SSA) will officially announce the 2026 COLA percentage on October 15, 2025. Until then, the 2.7% estimate might still change if inflation increases more than expected in the last months of the year. So, while retirees can use that number as a rough guide, the final percentage hasn’t been confirmed yet.
No matter how the numbers change from year to year, one thing stays the same — being informed and prepared is the best way to get the most out of every Social Security dollar.