Every year, the government reviews how prices rise and adjusts Social Security benefits through the Cost of Living Adjustment (COLA). The idea is simple: help retirees keep their purchasing power in the face of inflation.
This year, an increase has been confirmed, news that at first glance seems positive. However, not everyone will receive the full amount in their bank accounts due to deductions such as Medicare premiums.
How the increase is calculated
The Social Security Administration (SSA) uses the Consumer Price Index (CPI) to measure the variation in prices of essential goods and services, such as food, gasoline, or housing. When inflation rises, SSA adjusts benefits upward.
This year, with rising prices, a COLA increase of approximately 2.7% is expected. For an average beneficiary who receives $1,800 per month, this would represent about $54 more per month, or more than $600 per year. This extra money can help cover basic expenses and slightly ease the financial pressure on retirees.
Why not everyone will receive the full increase
Although COLA increases the checks, many older adults won't see all the money. The main reason is Medicare Part B premiums, which are deducted directly from Social Security benefits. For 2026, an increase of approximately 11.6% is expected, which equals $21.50 more per month for most retirees.
When adding this increase to the $54 from COLA, almost 40% of the increase will go toward covering Medicare premiums. This means retirees with fixed incomes could receive much less than desired, reducing the positive impact of the cost of living adjustment.
Who will benefit and what to do now
Not everyone will be equally affected. Those who are not yet enrolled in Medicare will likely receive the full increase. Those whose Medicare premiums barely rise or remain stable will also benefit.
Although we can't control inflation or premiums, we can prepare:
- Review Medicare premiums: Keep informed about next year's changes.
- Plan your budget: Adjust expenses to avoid surprises.
- Seek additional assistance: Some programs help cover Medicare or medication costs. Check if you qualify.
Why this matters
The increase in Social Security shows that the system works. However, health care costs are growing faster than benefits, leaving many retirees in a delicate situation. Relying too much on this increase can be a mistake.
It's important to calculate the actual amount you'll receive, considering deductions. With information and planning, even a partial increase can make a difference in financial stability during retirement. Stay alert to official updates and make smart decisions to protect your income.