John Hughie
Millions of Social Security recipients could receive a 2.7% cost-of-living adjustment (COLA) in 2026, based on the most recent inflation data.
This marks an upward revision from the previous 2.5% projection, highlighting how inflation is shaping benefit increases for retirees and other eligible groups.
Inflation Metrics Driving the COLA Adjustment
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)—the index used to calculate COLA—showed a 2.6% rise in June. Meanwhile, overall inflation climbed to 2.7%, up from 2.4% the previous month. These numbers exceed the Federal Reserve’s target inflation rate of 2%, suggesting continued cost pressures on household budgets.
The COLA is intended to help beneficiaries maintain their purchasing power as prices increase. However, in recent years, the adjustment has struggled to keep pace with steep increases in Medicare premiums, which significantly impact retirees’ take-home benefits.
Medicare Part B Premiums Outpacing COLA Growth
According to the 2025 Medicare Trustees Report, Medicare Part B premiums are set to jump from $185.00 in 2025 to $206.50 in 2026. That’s a monthly increase of $21.50, or 11.6%, marking the highest jump since 2022, when rates surged by 14.5%.
Since Part B premiums are automatically deducted from Social Security benefits, a large portion—or even all—of the COLA increase could be consumed by Medicare costs, particularly for those with lower monthly payments.
Mary Johnson, an independent expert on Social Security and Medicare, notes, “It’s not uncommon for Part B premiums to consume much or even all of the annual COLA, leaving little room for other rising expenses like housing or food.”
Who Is Most Affected by the Disparity?
If the COLA in 2026 is set at 2.7%, those receiving lower monthly Social Security benefits—around $800 or less—will be hit hardest. In these cases, the $21.50 Medicare premium increase could entirely absorb the COLA, offering no net gain for vulnerable recipients.
This concern is especially significant for retirees, widows, widowers, and individuals on spousal or disability benefits who already rely on modest monthly income.
Understanding How COLA Is Determined
The Social Security Administration calculates COLA using the average increase in the CPI-W from July to September each year. That means July’s inflation data will be crucial in finalizing the 2026 adjustment.
Though the CPI-W typically mirrors the broader consumer price index, small variations may influence the exact COLA figure. In the most recent update, the overall consumer price index rose by 2.7%, while the CPI-W increased by 2.6%.
How Many Americans Receive Social Security?
As of May 2025, 74.269 million individuals were receiving Social Security benefits, including retired and disabled workers, survivors, and Supplemental Security Income (SSI) recipients.
The average monthly benefit at that time stood at $1,860.64, underscoring how vital these payments are for millions of American households.
While the projected 2.7% COLA offers a glimmer of hope for increased Social Security payments in 2026, the sharp rise in Medicare Part B premiums could neutralize that boost for many recipients.
Individuals on lower monthly benefits are especially at risk of seeing no net gain, making it imperative to track inflation reports and Medicare costs closely as the year progresses.
Beneficiaries must stay informed and plan ahead, as even small adjustments can have significant impacts on their financial stability.
FAQs
How is the Social Security COLA calculated each year?
The COLA is based on the average inflation rate from July to September, measured using the CPI-W index. This determines the percentage increase in benefits for the following year.
Will everyone receiving Social Security get a 2.7% raise in 2026?
If the COLA is finalized at 2.7%, all eligible beneficiaries will receive this adjustment. However, increased Medicare Part B premiums may offset the actual increase in monthly payments.
Why are Medicare premiums rising faster than Social Security benefits?
Medicare Part B costs are growing due to rising healthcare expenses and increased utilization, outpacing COLA and reducing the net benefit for many retirees.
