When It Comes to Social Security's COLA, This Is the Real Number to Pay Attention To

Retirees got big news on Oct. 24. The Social Security Administration announced that those collecting benefits would receive a 2.8% cost-of-living adjustment (COLA) in the upcoming 2026 year. COLAs are common and occur during most years, but this one is larger than the one retirees got in 2025 -- at least on paper. The reality might look very different, though.

In fact, when it comes to understanding how the 2026 COLA could impact your budget, there's actually another number that you really need to focus on beyond the 2.8% raise that's already been announced. Let's see what that is.

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This is the number that matters when it comes to the 2026 COLA

If you look at the raw numbers, a 2.8% Social Security COLA seems fairly reasonable and even generous for retirees. COLAs are meant to help ensure benefits keep pace with inflation. Since inflation has surged in the post-pandemic period, the COLAs have been larger than normal, coming in at:

• 2.8% for 2026
• 2.5% for 2025
• 3.2% for 2024
• 8.7% for 2023
• 5.9% for 2022
• 1.3% for 2021

While the 2026 COLA is a bit smaller than it's been for most of the past few years, the fact that it beat out this year's raise should theoretically give retirees more wiggle room during their retirement planning for the upcoming year. That may not be the case, though, because there's another really important number to look at: the rise in Medicare premiums.

Medicare premiums come out of most seniors' Social Security checks. Sadly, a very substantial increase in premiums is coming, and it will eat up a good portion of the COLA. This means seniors are potentially going to be worse off next year in terms of their benefits increase, despite the "bigger" raise.

Why is the Medicare premium increase the most important number for 2026?

Medicare's premium increase is the key number for Social Security retirees to look at next year because it is going to be such a big one. In 2025, most retirees pay $185 per month for their Medicare Part B coverage, which is the amount that was predicted by the Medicare trustees last year. That $185 reflected a $10.30 benefit increase compared with the $174.70 that the typical retiree was paying in 2024.

Unfortunately, in 2026, the Part B premium is expected to increase substantially more. In a recent report, the Medicare trustees predicted that the 2026 COLA would jump 11.6%, rising $21.50 per month and leaving most retirees paying $206.50 for their Part B coverage. When you look at that increase, it's easy to see that a huge portion of the COLA is going to disappear for most seniors.

The average Social Security benefit is around $2,008 per month. If you're earning close to the average and you get a 2.8% raise, you'll get $56.22 more per month thanks to the COLA in 2026. But Medicare's $21.50 increase is going to reduce that amount down to just $34.72, and it will take almost half of the amount you get.

Last year, on the other hand, retirees got a 2.5% raise -- so someone receiving $2,008 a month would have brought home $50.20 more due to the COLA -- but with Medicare premium increases only taking $10.30 of it, the smaller benefit bump would have ended up providing more money than this year's "bigger" raise.

When planning for retirement in the upcoming year, seniors need to pay attention to this Medicare number and be aware of what a big bite it is going to take from their raise. A 2.8% COLA isn't going to increase their checks by anywhere near the full 2.8% thanks to the impact of the Medicare premium increase, and those who want to maintain their buying power may find themselves relying on more distributions from their 401(k) or IRA because of it.

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