When the Social Security Administration announced late last year that benefits would be getting a 2.8% cost-of-living adjustment, or COLA, in 2026, reactions were mixed. Some seniors were no doubt relieved to learn that 2026’s COLA would be larger than 2025’s 2.5% raise. But many were no doubt disappointed.
Motley Fool research found that 54% of retirees felt a 2.8% COLA would not suffice in 2026. And 68% said that raise would provide little to no help in covering essential costs. When we look at how much Medicare increased in 2026, it’s easy to see why so many retirees felt that a 2.8% COLA was nothing more than a giant letdown.
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Medicare’s premium hike eats heavily into this year’s COLA
Seniors who are enrolled in Medicare and Social Security at the same time pay their Part B premiums out of their monthly benefits automatically. This means that when the cost of Part B increases substantially, seniors can be left with very little in terms of a net COLA.
That’s precisely what happened this year. The cost of Medicare Part B rose from $185 in 2025 to $202.90 in 2026.
Without that hike, the typical senior on Social Security was looking at about a $56 increase following 2026’s COLA. For seniors on both Social Security and Medicare, that raise now gets whittled down to about $38 a month for the average beneficiary.
But it’s not just that the cost of Medicare Part B went up. Medicare costs rose across the board.
The annual Medicare Part B deductible this year is $283 — a $26 increase from 2025. For some seniors, that higher deductible might take up a single month’s COLA.
And the costs associated with Medicare Part A all rose, too. This year, it’s more expensive to cover an inpatient hospital deductible and daily coinsurance.
The problem is likely to be ongoing
This year, Social Security recipients got a pretty bad deal — a smaller COLA coupled with a huge Medicare premium hike. But a COLA that doesn’t hold up well isn’t a 2026 problem. Rather, it’s an ongoing problem.
Social Security COLAs are based on changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). But the CPI-W doesn’t accurately account for the costs retirees tend to face.
Social Security recipients commonly spend a large chunk of their income on healthcare costs, which tend to rise at a faster pace than broad inflation. Since the CPI-W doesn’t account for that, COLAs tend to fall short — even when they’re far more generous than 2.8%.
That’s why it’s best to not retire on Social Security alone. While the program’s COLAs are helpful, seniors commonly lose buying power over time because of them. Building retirement savings or finding other income streams is the best way to keep up with inflation as it pertains to healthcare and expenses in general.