How 2025 COLA Increases Compare to What's Coming in 2026: The Numbers Stack Up Differently

What Retirees Actually Need to Know

Social Security beneficiaries expecting relief from rising costs will get another adjustment next year, but the real story isn’t what the headline number suggests. While the 2026 COLA increase is projected to reach 2.7%—higher than the 2.5% bump retirees received in 2025—the actual money hitting your bank account tells a very different tale.

The Senior Citizens League’s estimate shows that 2026 will deliver a slightly larger cost-of-living adjustment than 2025, marking a reversal from the dramatic reductions we’ve seen in recent years. Yet this modest improvement masks a far more troubling reality: Medicare premiums are set to consume most of that gain.

The Real Cost: Medicare Premiums Eat Into COLA Gains

Here’s where the numbers get uncomfortable. In 2025, Medicare Part B premiums increased by $10.30 per month, rising from $174.70 to $185.00. That was manageable. In 2026, however, projections from the Medicare Board of Trustees show Part B premiums jumping $21.50—more than double the previous year’s increase—pushing the premium to $206.50.

This represents one of the steepest year-over-year increases in Medicare’s history, and it will directly offset much of the COLA benefit.

Consider a concrete example: A retiree with a $2,000 monthly check in 2025 would see a 2.7% increase in 2026, translating to roughly $54 more per month. But the $21.50 Medicare premium hike would consume most of that gain, leaving only $32.50 in genuine purchasing power. Compare that to 2025, when a 2.5% raise generated about $50, with just $10.30 going to Medicare premiums—providing $39.70 in actual relief.

How This Stacks Up Against Recent Years

The 2026 COLA increase of 2.7% falls between recent history’s extremes. It’s better than 2025’s 2.5%, but substantially smaller than the 3.2% in 2024, the historically high 8.7% in 2023, or the 5.9% adjustment in 2022. Yet even those larger numbers provided less real benefit than the percentages suggest once healthcare costs entered the equation.

The Inflation Paradox

The uncomfortable truth is that a higher COLA increase isn’t inherently good news. Cost-of-living adjustments are mathematically tied to inflation rates—bigger adjustments mean higher inflation. For retirees on fixed incomes, elevated inflation typically erodes purchasing power faster than benefit increases can restore it.

Many seniors have conservative investment portfolios designed to protect principal rather than generate growth. When inflation runs high, these portfolios often can’t keep pace, compounding the squeeze on retirement finances.

Looking Ahead

The official 2026 COLA announcement will arrive on October 24, 2025, providing clarity on the exact percentage increase. While the 2.7% estimate represents a modest improvement over the 2.5% increase retirees experienced in 2025, beneficiaries should temper expectations. The combination of higher Medicare premiums and persistent inflation means that what looks promising on paper may deliver disappointment in practice.

Smart retirees will treat this period not as a victory but as a reminder to review their complete financial picture—including healthcare costs, investment allocations, and whether current benefit levels can sustainably cover their needs.