Retirees: This Hidden Cost Could Shrink Your Social Security COLA

Nearly 30% of retirees depend on Social Security as their only source of retirement income, according to The Motley Fool's Social Security Cost-of-Living Adjustment survey, and only 5% say they don't rely on their benefits at all.

Annual cost-of-living adjustments (COLAs) can be a lifeline as everyday costs continue to rise and many retirees struggle to make ends meet. However, there's a hidden cost that could eat away at your benefits. Here's what you need to know.

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How Medicare affects your Social Security

If you're aged 65 or older, you may qualify for Medicare coverage. While Part A under original Medicare is typically premium-free, retirees will generally pay a premium for Part B coverage.

But how does that affect the COLA? Part B premiums are usually deducted from retirees' Social Security checks, and because these premiums increase most years, they can take a bite out of your annual raise.

In 2026, beneficiaries received a 2.8% COLA. With the average retiree collecting around $2,075 per month in benefits, according to the Social Security Administration, that amounts to a raise of around $58 per month.

This year, Part B premiums increased by $17.90 per month. So, while the average retiree should be getting a benefit increase of around $58 per month thanks to the COLA, that raise would actually be closer to around $40 per month after Part B premiums are deducted.

Medicare is a necessity for many retirees, so you may not be able to avoid paying Part B premiums. But by factoring this cost into your budget, it can be easier to keep realistic expectations about how far the annual COLAs will go in retirement.

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