Why Millions Could Lose Out on Social Security COLA Adjustments Next Year

Even as the government looks to reopen and get the Social Security Administration back to full strength, there is still a bigger concern out there around the most recent cost-of-living increase, or COLA, and what it means for the millions of individuals who rely on this money for living expenses.

Quick Read

• The Social Security Administration (SSA) announced a 2.8% cost-of-living adjustment for 2026, raising the average monthly benefit by $56 to $2,065.

• Medicare Part B premiums will jump 11.5% in 2025 to $206.20 monthly, automatically deducted from Social Security checks and offsetting most COLA gains.

• Social Security COLA uses CPI-W instead of a seniors-focused index, understating actual cost increases for healthcare and housing that retirees face.

• Some investors get rich while others struggle because they never learned there are two completely different strategies to building wealth. Don’t make the same mistake, learn about both here.

Announced on October 24, the Social Security Administration indicated that the 2026 cost-of-living adjustment would be 2.8%, just a few tenths of a percentage higher than was issued in 2025. The challenge here is that even with this increase, millions of people could lose out altogether, which is devastating news.

The real concern for most people watching this closely is that even with a 2.8% “raise,” there are going to be millions of retirees who may end up falling further behind and into a deeper financial hole.

The 2026 COLA Announcement

Any increase from COLA is going to be hotly awaited by the more than 70 million Americans who annually receive benefits from Social Security. Although the announcement was slightly delayed by the government shutdown, the SSA announced a 2.8% increase.

This increase will make 2026 the fifth consecutive year that recipients of Social Security have seen their payouts climb by at least 2.5%, which is a streak that the country hasn’t seen since the late 1980s. By all accounts, this sounds really good on paper, as the average worker’s monthly benefit should rise about $56, bringing the average Social Security check to approximately $2,065.

Unfortunately, there is something that should have millions of Americans concerned: this number looks good in headlines, but with rising costs for healthcare and housing going up, this small COLA gain might not account for much for millions. In fact, it may not do enough to combat these rising costs, especially those in the medical area.

The Medicare Premium Problem

Ultimately, the heart of the matter is that for those Americans who receive Medicare Part B premiums, which are expected to jump a whopping 11.5% in 2025, to around $206.20 monthly, up from $185, this COLA increase doesn’t amount to much of anything.

Consider that for most retirees, these premiums for Medicare Part B are going to be automatically deducted from their future Social Security checks in 2026. What this means is that a sizable portion, if not the entirety, of someone’s 2.8% COLA increase will be lost well before any check hits a bank account.

There is no way around this, and it’s quickly becoming a frightening reality for millions of Americans who rely on Social Security. The situation is basically summed up by saying that as one government benefit rises slightly, another offsets it almost immediately.

Now, factor in the fact that 2026 is going to mark the eighth double-digit increase in Medicare Part B premiums in the past 25 years, and it’s just disheartening news all around.

The Big Picture: COLA Is Based on an Outdated Formula

Where I think things get really difficult to swallow is that COLA is based on an outdated formula that is in desperate need of an update. The fact that the adjustment is tied to changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) and not seniors is a huge oversight that needs to be rectified.

I’m not at all surprised that experts in this space have long argued that Social Security cost-of-living increases should be based on a Consumer Price Index for the Elderly (CPI-E), which is going to put more weight on categories like medical expenses and housing.

The hope, according to these same experts who closely track the Social Security Administration, is that under CPI-E, the cost-of-living adjustment would be higher and more accurately reflect the real-world costs retirees are facing.

Unfortunately, we’re living in a period where these “raises” are only good on paper, and don’t do much of anything to really increase the buying power of those who rely on Social Security for monthly expenses.

What Can Retirees Do Right Now?

While individual Social Security recipients can’t control how the cost-of-living adjustment is calculated, there are ways to prepare for the upcoming squeeze.

• Track Your Spending: You can start by identifying where inflation is going to hit the hardest, like housing, healthcare, and utility expenses. Knowing where your money is going will be key to understanding how to best tackle increasing costs and expenses.

• Maximize Supplemental Income: The hope is that there is some kind of supplemental income available, like dividend-paying ETFs, annuities, or something else that can provide additional cash flow.

• Delay Claiming: Given that Social Security checks can rise significantly if you delay until you get closer to 70, this might help people who either want to stay in the workforce or have other investments available not to grab Social Security starting at 62.

• Review Medicare Coverage: As tricky as it might be to wrap your head around all of the numbers, you might be able to switch Medicare plans to help reduce premiums from jumping too high.

The hope is that, for most retirees, the 2026 cost-of-living increase will deliver modest relief, but it isn’t a long-term solution and never has been. Hopefully, Washington will get its act together one day and modernize the formula so it’s more than just a safety net full of small holes.