The announcement from the Social Security Administration late last year about a 2.8% cost-of-living adjustment (COLA) for benefits in 2026 was met with mixed feelings. Sure, some seniors felt relieved knowing the increase was larger than the 2.5% in 2025. But, many were left feeling disappointed.
According to a Motley Fool study, 54% of retirees believe that a 2.8% COLA won’t meet their needs in 2026. Even more striking, 68% think that salary increases won’t adequately cover essential expenses. Given the rise in Medicare costs in 2026, it’s clear why many retirees felt let down by the COLA announcement.
Medicare premium hike will significantly erode COLA this year
For seniors who sign up for Medicare and Social Security simultaneously, their Part B premiums are deducted directly from their monthly benefits. This means that if Part B costs rise significantly, the real benefit of any COLA can diminish considerably.
This was the case this year. Medicare Part B premiums jumped from $185 in 2025 to $202.90 in 2026.
If not for this hike, a typical senior could have expected a COLA increase of about $56 in 2026. Instead, for those on both Social Security and Medicare, the average increase shrinks to about $38 each month.
But it doesn’t stop there; overall Medicare costs have risen as well.
The annual deductible for Medicare Part B is now $283, up by $26 since last year. For some seniors, that deductible could consume a whole month’s COLA.
Additionally, costs associated with Medicare Part A have also surged this year, affecting hospitalization and daily coinsurance rates.
The problem is likely to continue
This year, it seems Social Security recipients are facing a rough situation with diminished COLAs and soaring Medicare premiums. However, this issue isn’t restricted to just 2026; it’s a recurring problem.
The COLA for Social Security is based on shifts in the Consumer Price Index for Urban Wage and Office Workers (CPI-W), which doesn’t accurately reflect the expenses retirees encounter.
Seniors usually spend a significant chunk of their income on healthcare, and those costs tend to rise faster than general inflation rates. Unfortunately, the CPI-W misses this crucial point, which is why even a seemingly generous 2.8% adjustment often falls short.
That’s why it’s not ideal to rely solely on Social Security during retirement. While COLAs can be beneficial, purchasing power usually erodes over time. To genuinely keep pace with inflation—especially for healthcare—seniors should consider boosting their retirement savings or exploring other income sources.
