Social Security Is Getting a Raise This Month—But Is It Really Good News for Retirees?

The 2.8% COLA Increase Arrives, But There’s a Catch

Over 70 million Americans receiving monthly Social Security benefits just saw their payments go up with the new year’s cost-of-living adjustment (COLA). On paper, it looks like great news: the Social Security Administration (SSA) announced a 2.8% increase for 2026, marking a historic milestone—the first time in nearly three decades that Social Security has experienced COLA increases of at least 2.5% for five consecutive years.

For the average retired worker, this translates to an additional $56 per month, bringing the typical Social Security payment to $2,071. Workers with disabilities will see their average monthly benefit rise by $44 to $1,630. Survivor benefits are expected to increase similarly, gaining roughly $44 monthly to reach approximately $1,618 on average. Over a full year, the average retired worker pockets an extra $672—undeniably better than nothing.

Yet for millions of beneficiaries who depend heavily on these payments—with Gallup surveys showing 80% to 90% of retirees relying on Social Security to cover essential expenses—the picture becomes far more complicated when other factors enter the equation.

The Real Problem: Your Raise Might Disappear Before You See It

While the 2.8% COLA sounds impressive compared to the post-2010 average of 2.3%, a major threat looms for many retirees enrolled in traditional Medicare. The Centers for Medicare and Medicaid Services announced a 9.7% spike in Medicare Part B premiums for 2026—a nearly double-digit jump that will directly reduce Social Security payments for affected beneficiaries.

For those who pay Medicare Part B premiums (which cover doctor visits and outpatient services), the monthly deduction is climbing by $17.90 to $202.90. This single factor could wipe out a significant portion—or potentially all—of this year’s Social Security raise, particularly for low-income retirees who earned less throughout their working lives.

The Inflation Mismatch: Where COLA Falls Short

Beyond the Medicare premium squeeze, there’s another structural problem with how Social Security calculates its annual adjustment. Since 1975, the SSA has used the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to measure inflation and determine COLA increases.

The flaw? The CPI-W was designed to track spending patterns of working-age Americans, not retirees aged 62 and older. Seniors allocate their budgets differently, with shelter and medical care representing much larger expense categories than they do for younger workers. Yet the CPI-W doesn’t weight these expenses more heavily for seniors—even though medical care and housing costs have historically climbed faster than the annual COLA itself.

This means the 2.8% increase that sounds protective on the surface may leave retirees with reduced purchasing power in the categories that matter most to them: healthcare and housing. For decades, trailing 12-month inflation in these sectors has outpaced Social Security’s annual benefit increases, creating a slow erosion of real income.

The Bottom Line: A Win That Feels Like a Loss

The 2026 Social Security raise represents genuine good news in a vacuum. Year-over-year increases of at least 2.5% for five straight years (including the 5.9%, 8.7%, 3.2%, and 2.5% raises from 2022 through 2025) have provided meaningful nominal-dollar growth to beneficiaries’ checks. Getting a social security raise this month is something to acknowledge.

However, when you factor in soaring Medicare premiums and the inherent mismatch between how COLA is calculated and how retirees actually spend their money, the financial picture for many seniors remains precarious. For lower-income retirees, this 2026 increase might barely offset the higher healthcare costs they’ll face, leaving their overall economic security largely unchanged—or potentially worse off than last year.