The 2026 Social Security COLA Is Final, but Retirees Need to Brace for This Big Blow

The Social Security cost of living adjustment (COLA) has been finalized for 2026. In an announcement on Oct. 24, the Social Security Administration (SSA) told retirees and other beneficiaries that a 2.8% raise is coming next year.

This is a larger increase than the one recipients got in 2025, when benefits rose by just 2.5%. Both the 2025 and 2026 raises are the first COLAs that dropped below 3% in the post-pandemic era. The smaller increases followed a 5.9% raise in 2022, an 8.7% increase in 2023, and a 3.2% bump in 2024.

For retirees who had become used to larger benefit increases, a 2.8% raise instead of just 2.5% may seem like good news. Unfortunately, retirees need to prepare for a big disappointment when it comes to the benefits increase in the upcoming year.

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Retirees need to face the reality of the 2026 COLA

The harsh truth about the upcoming COLA is that retirees' checks won't increase by the full amount expected -- or even close to that amount. The reason: Medicare costs.

Retirees who are signed up for Medicare coverage (which includes most Americans 65 and over) are facing a big blow in 2026 because premiums for Part B are going up by a lot. These premiums are typically withdrawn directly from Social Security checks prior to the payments being deposited, so retirees will end up with far less extra money than that 2.8% COLA would suggest.

Let's say, for example, that a retiree is getting a monthly benefit of around $2,000, which is pretty close to the average. A 2.8% raise on a $2,000 benefit would, in theory, result in Social Security checks going up by around $56.

This isn't necessarily exact because the formula used by the SSA to apply COLAs is a little more complicated than just adding 2.8% to the current benefit. Still, the estimate is close.

But rising Medicare premiums have to come out of this $56 -- and they'll eat up a lot of that.

How much damage will rising Medicare premiums do?

Premiums for Medicare Part B are increasing by nearly 10% in 2026.

While typical retirees paid $185 per month for premiums in 2025, they'll pay $202.90 per month in 2026. The extra $17.90 will comes directly off the raise for most, so a $56 raise would actually result in checks increasing by only around $38.10 next year instead of the expected $56.

Losing so much of the benefits increase could be devastating to retirees who have continued to be hit hard by inflation in recent years. And unfortunately, while COLAs are theoretically supposed to ensure that benefits keep up with rising costs -- including healthcare expenses -- that's not necessarily happening.

The problem is that the formula used to calculate COLAs looks at how much prices have gone up on a basket of goods and services used by urban wage earners and clerical workers. This group doesn't tend to have such high medical care costs (or to have other spending habits that mirror seniors very well).

The COLA formula thus ends up underestimating the actual price increases experienced by the elderly -- especially in years where Medicare costs are going up substantially.

Sadly, there's really very little retirees can do about this because the Social Security benefits formula isn't likely to change to provide larger adjustments or to use a more relevant COLA formula anytime soon -- an issue that needs to be taken into consideration during retirement planning.

If COLAs don't keep up with inflation and if healthcare costs, including Medicare premiums, rise substantially, retirees may have little choice but to spend more from their 401(k) or other retirement accounts, or to reduce their living standard to account for benefits that have declining buying power.

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