Social Security's Silver Lining Will Be Missing in 2026, and That's Potentially Terrible News for Up to 30 Million Retirees

In November, over 70 million people received a Social Security benefit, more than 53 million of whom are retired workers. For most of these retirees, Social Security income isn't a luxury -- it's a necessity.

In 2023, Social Security lifted 22 million Americans above the federal poverty line (including 16.3 million adults aged 65 and over), which is more than any other social program. It's also responsible for lowering the poverty rate for seniors aged 65 and above to 10.1% (as of 2023) from an estimated 37.3% if the program didn't exist.

For retired-worker beneficiaries, few announcements are more anticipated than the annual cost-of-living adjustment (COLA), which allows them to calculate how much they'll receive on a monthly basis for the upcoming year. While the prospect of a larger payout tends to put a smile on the faces of Social Security's traditional beneficiaries, up to 30 million retired workers may be primed for a massive disappointment in the new year.

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Social Security's 2026 COLA has historical significance

Social Security's highly publicized cost-of-living adjustment is the near-annual raise that's passed along to beneficiaries to offset the effects of inflation (rising prices).

For instance, if the cost to purchase a broad basket of goods and services rises by 2% from one year to the next, Social Security checks would have to increase by the same percentage to avoid a loss of purchasing power. Since 1975, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) has served as the price-tracking yardstick for America's leading retirement program.

On Oct. 24, nine days later than initially scheduled due to the federal government shutdown, the Social Security Administration revealed the 2026 COLA would be 2.8%, which was more or less in line with independent estimates leading up to the announcement.

On a comparative basis, the 2.8% raise for the upcoming year is modestly ahead of the 2.3% average increase in benefits since 2010.

Next year's raise also holds historical significance. The new year marks the fifth consecutive cost-of-living adjustment totaling at least 2.5%. It's been 29 years (1988 through 1997) since Social Security beneficiaries have witnessed their monthly checks climb by at least 2.5% for five straight years.

While Social Security COLAs of 5.9%, 8.7%, and 3.2% from 2022 through 2024 were higher on a percentage basis, the nominal-dollar impact of a 2.8% boost to benefits will be felt. In May 2025, the average monthly retired-worker benefit surpassed $2,000 for the first time in the program's 90-year history. In 2026, the average retired worker can expect their monthly payout to increase by $56 to $2,071.

Meanwhile, a 2.8% cost-of-living adjustment is expected to translate into an average increase in benefits of $44/month for both workers with disabilities and survivors of deceased workers in 2026.

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Social Security's silver lining is missing for up to 30 million aged beneficiaries in the new year

In an ideal world, the CPI-W would perfectly capture the inflationary pressures that Social Security recipients face, resulting in annual COLAs that ensure no loss of buying power. But this isn't an ideal world, and the CPI-W is far from perfect.

The inflationary index responsible for determining how much of a raise more than 70 million traditional Social Security beneficiaries receive is based on the pricing pressures faced by "urban wage earners and clerical workers." These are predominantly working-age Americans who aren't currently receiving a retired-worker benefit.

More importantly, their spending habits are usually very different from those of adults aged 62 and above. The expenses that matter most to retired workers, such as shelter and medical care services, aren't adequately accounted for in the CPI-W. The result has been a 20% loss of purchasing power for Social Security income since 2010, based on an analysis by nonpartisan senior advocacy group The Senior Citizens League.

However, the CPI-W's shortcomings may take a back seat to the absence of a silver lining for up to 30 million retired-worker beneficiaries in 2026.

Based on data provided by the Centers for Medicare and Medicaid Services (CMS), 69.4 million people were enrolled in Medicare (both traditional Medicare and Medicare Advantage plans) as of September 2025. The CMS notes that 90% of these enrollees are over the age of 65, which equates to 62.46 million members.

Among those aged 65 and over, the CMS lists 51.3% as enrolled in a Medicare Advantage plan (also known as Medicare Part C) or another health plan. This means 48.7% of enrollees aged 65 and above, or 30.41 million people, have a traditional Medicare Part A (inpatient hospital) and Part B (outpatient services) plan.

Although we don't know the precise number of retired workers who receive a monthly Social Security benefit and are enrolled in traditional Medicare, this figure could be as high as 30 million. For these folks, a big disappointment awaits.

While around 99% of Medicare beneficiaries receive Part A coverage at no cost (i.e., with no monthly premium), a monthly premium is associated with Part B coverage. In 2026, the base monthly premium for Part B is climbing by a scorching-hot 9.7% to $202.90 per month from $185.00 per month this year. The CMS attributed the nearly double-digit percentage increase in 2026 to higher costs for healthcare services and increasing utilization rates (i.e., more people using Medicare services).

For lifetime low-earners and even some middle-income retirees, a 9.7% increase in the Part B premium is going to sting, and has the potential to eat up some or all of their cost-of-living adjustment in the new year.

Since the monthly Part B premium decreased by 3% in 2023 and provided a silver lining for those dually enrolled in Social Security and traditional Medicare, the Part B premium has increased by 5.9% (2024), 5.9% (2025), and 9.7% (2026). For the up to 30 million retired-worker beneficiaries enrolled in traditional Medicare, the absence of this silver lining for a third consecutive year is terrible news.

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