The Surprising Reason Retirees Will Be Unhappy With Their 2026 Social Security Raise

Social Security will soon be making a big announcement. On Oct. 24, 2025, the Social Security Administration will finally let seniors know what their 2026 Cost of Living Adjustment (COLA) is going to look like.

COLAs happen in most years to help retirees maintain their buying power. Because COLAs increase the retirement benefits seniors collect, the news about how big the raise will be is always much-anticipated.

Unfortunately, although retirees are most likely going to get a bigger benefits increase than last year, many seniors are inevitably going to end up disappointed with the increase to their checks in 2026.

Here’s the surprising reason why that’s the case.

Image source: Motley Fool.

The COLA is going to be bigger– but there’s a problem

Although the official announcement on the Social Security COLA has not been made yet, the Senior Citizens League is projecting that benefits are going to increase by 2.7% next year. This estimate is based on year-to-date changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

CPI-W is used to determine how much Social Security benefits should increase because it helps to measure inflation, and the purpose of the COLAs is to make sure that Social Security benefits do not lose buying power. While the formula isn’t a perfect one since the spending habits of urban wage earners and clerical workers aren’t exactly aligned with senior spending, the formula does give an idea of how much prices are rising — and retirees get a benefits increase equal to the average year-over-year change to CPI-W in the third quarter of the year.

Since we have a lot of this data available, the Senior Citizens League estimate is probably fairly close to accurate, and barring any major surprises when the September inflation data is released in October, the raise should come in at around that projected 2.7%. And, if it does, that will be a little bit bigger than the benefits increase retirees received in 2025.

A bigger raise should make seniors pretty happy since they’ll get more money to help maintain buying power — but there’s a surprising reason why that’s not necessarily going to be the case. The problem is that a good portion of the additional funds coming to retirees will disappear to cover rising Medicare premiums.

COLAs will take a huge hit due to rising Medicare premiums

For any retiree who is on Medicare, the COLA is probably going to be a huge disappointment because of how little of it will be left after Medicare premiums are accounted for.

See, Medicare premiums come out of most people’s Social Security checks. And Medicare Part B premiums are going up by a huge amount next year. The Medicare Trustees’ report projects that premiums are going to increase by $21.50 per month, jumping all the way up from $185 in 2025 to $206.50 in 2026. This is one of the biggest year-over-year increases in the history of the Medicare program.

If a typical retiree is collecting the average benefit of $2,008.31 in 2025, a 2.7% COLA would result in their benefits increasing by around $54. If $21.50 of that disappears, then the typical retired Social Security recipient will end up seeing their monthly payments go up by only $32.50.

By contrast, if someone had started with that same $2,008.31 check in 2025 and received a 2.5% COLA, they’d have seen their benefit go up by around $50.00 — but, since Medicare premiums only rose by $10.30 per month between 2024 and 2025, retirees would have seen benefits go up by around $40.

Retirees need to be aware that so much of their benefit increase is going to disappear to rising Medicare premiums this year, and take that into account during their retirement planning process for the upcoming year. Seniors need to maintain a safe withdrawal rate from their 401(k) and other retirement accounts, and with a Social Security raise that ends up pretty small after Medicare costs take a bite out of it, this may require some careful budgeting.