Social Security Benefits Get a 2.8% COLA in 2026, But Retirees Could Lose Out for These 2 Reasons

When the Social Security Administration (SSA) finally announced an official cost-of-living adjustment (COLA) for 2026, many seniors were no doubt relieved to hear that their benefits would be rising by 2.8%, marking a larger raise than the 2.5% COLA Social Security got in 2025.

You may be hopeful that your 2.8% Social Security COLA will go pretty far in the new year. But in the context of that COLA, retirees unfortunately stand to lose out for these two reasons.

Image source: Getty Images.

1. Inflation could erode the value of Social Security's upcoming COLA

Social Security COLAs are based on changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). When there's an increase in the CPI-W from one year to the next during the months of July, August, and September, Social Security benefits are eligible for an increase.

The problem is that the CPI-W does not do a good job of measuring the cost increases Social Security recipients face specifically. Many seniors, for example, spend a lot of their income on healthcare expenses. But healthcare isn't a heavily weighted factor in the CPI-W.

The nonpartisan Senior Citizens League, an advocacy group, reports that Social Security recipients lost 20% of their buying power between 2010 and 2024 due to insufficient COLAs. And a recent Motley Fool survey found that 54% of Social Security recipients think a 2.8% COLA won't be enough in the new year.

Advocates have pushed to use a senior-specific index to calculate COLAs. But until that change is approved (if it gets approved), Social Security recipients may end up with COLAs that don't go very far.

Plus, in the coming months, tariffs could drive prices higher. If that happens, seniors might get even less of a lift out of their upcoming COLA.

2. Medicare premium increases will eat into some seniors' raises

Social Security recipients who are enrolled in Medicare have their monthly Part B premiums deducted from their benefits automatically. This is a convenient way to pay for those premiums. But it also means that when the cost of Medicare Part B rises, seniors lose out on a portion of their COLA.

Such is the case for 2026. The standard monthly premium for Medicare Part B is rising from $185.00 in 2025 to $202.90 for 2026. That's an increase of $17.90 per month, which is not insignificant.

Meanwhile, the SSA says the average monthly retirement benefit is $2,015. And once next year's 2.8% COLA is applied, that average benefit should rise to $2,071 -- an increase of $56. But with Medicare costs rising so substantially, any senior who's also enrolled in Part B will lose around 32% of their upcoming COLA to that increase.

The good news is that Social Security's upcoming COLA is still high enough for Medicare enrollees to net a modest raise. That's not always a given. But still, it's another reason 2026's COLA may not go very far.

Keep your expectations in check

If you're hoping next year's 2.8% Social Security COLA will do a world of good for your finances, you may need to reset your expectations. There's a good chance that raise will only give you a small amount of extra income in the new year, and that inflation will eat that increase right up.

You may want to take steps to proactively improve your finances given that your upcoming COLA may not go so far. Those could include trimming expenses or getting a job, whether it's part-time work or a role in the gig economy.

Moving to a part of the U.S. where costs are cheaper overall could also help stretch your benefits. And it may be a smart thing to do at a time when inflation is still very much a problem.

The Motley Fool has a disclosure policy.