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Image source: Getty Images.<\/p>\n
Making the COLA taste a little better<\/p>\n
Before I go any further, the aforementioned good news did not come from the Social Security Administration (SSA). It has ramifications for Social Security beneficiaries, though.<\/p>\n
The good news I’m referring to was announced earlier in January by the U.S. Bureau of Labor Statistics (BLS). Each month, the BLS releases inflation<\/a> data for the previous month. And the December numbers should be encouraging for retirees.<\/p>\n According to the BLS, the Consumer Price Index (CPI)<\/a> for December 2025 was 2.7%. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), the inflation metric that SSA uses to calculate the annual Social Security cost-of-living adjustment (COLA)<\/a>, was 2.6%. <\/p>\n Why are these numbers good news for retirees? The Social Security COLA for 2026 is 2.8%. At least at the end of 2025, prices of goods and services increased at a lower rate than Social Security benefits. <\/p>\n This year’s Social Security COLA was significantly lower than the average historical increase of 3.7%. However, as long as retirees’ benefits grow at least as much as prices increase, the buying power of their Social Security checks won’t deteriorate. <\/p>\n Good news, but not great news<\/p>\n With all of this in mind, the December inflation report from the BLS was good news for retirees on Social Security. Unfortunately, though, it wasn’t great news.<\/p>\n For one thing, SSA calculated the benefit increase that retirees received in 2026 based on inflation data (using the CPI-W metric) for the third quarter of 2025. COLAs are always after the fact. In other words, if you’re retired, you’ve already paid the higher prices that this year’s COLA was intended to offset. Inflation in December 2025 that’s slightly lower than the 2026 COLA doesn’t really make the benefit increase more attractive.<\/p>\n Another factor further diminishes the impact of the December inflation data. The actual inflation retirees experience is often greater than the CPI or CPI-W numbers reflect. One key reason is that rapidly rising healthcare costs account for a larger share of retirees’ overall spending.<\/p>\n As a case in point, look at the Medicare Part B increases for this year. Standard Medicare Part B premiums jumped 9.7% year over year, from $185 to $202.90. This $17.90 increase negates a significant chunk of the average $56 monthly benefit increase for retired workers resulting from the 2026 Social Security COLA.<\/p>\n