Each fall, the Social Security Administration (SSA) announces key changes to the program, and this past October was no exception.
The SSA announced the following changes for 2026:
- A higher earnings-test limit for beneficiaries who work while receiving Social Security
- A higher maximum monthly benefit
- A new wage cap
- A new requirement for earning Social Security work credits
But perhaps the most significant update was a 2026 cost-of-living adjustment (COLA) announcement.
The SSA announced that in 2026, Social Security benefits will be rising 2.8%. That’s a notch higher than the 2.5% COLA seniors received at the start of 2025.
Whether that upcoming COLA holds up well will hinge a lot on how inflation trends. In November, inflation dropped to 2.7%, according to that month’s Consumer Price Index. If inflation continues to wane, seniors could get some real lift out of their 2.8% COLA.
But there’s one expense that might eat into that COLA significantly. And it’s one seniors need to be aware of.
Medicare’s 2026 premium announcement: A financial blow to retirees
Just as Social Security is subject to changes from year to year, so too is Medicare. In 2026, Medicare costs are rising, and they’re apt to deal all enrollees a harsh blow.
The standard monthly premium for Medicare Part B is rising from $185 in 2025 to $202.90 in 2206. The annual deductible for Part B is also increasing from $257 to $283.
Part A costs are rising, too. Though most Medicare enrollees do not pay a premium for Part A, which covers hospital care, out-of-pocket Part A costs are going up.
The inpatient hospital deductible for Part A is rising from $1,676 to $1,736 in 2026. And the daily coinsurance rate for days 61 through 90 of a hospital stay is increasing from $419 to $434.
Skilled nursing costs are also rising. The current daily rate of $209.50 is increasing to $217 in 2026.
The double whammy for dual Social Security enrollees
The upcoming increase in Part B premiums is particularly problematic for seniors who are enrolled in Medicare and Social Security at the same time. People in this situation pay their Part B premiums out of their monthly benefits automatically.
Without an increase in Part B, the typical Social Security recipient is looking at a $56 monthly increase in retirement benefits after the upcoming 2.8% COLA is applied. But when we factor in an additional $17.90 to account for higher Part B costs, that average increase after the COLA gets whittled down to about $38.
In fact, this underscores a big problem with the way Social Security COLAs are calculated. They’re based on third quarter changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
But the CPI-W does not accurately reflect the expenses Social Security recipients tend to face. And a big reason is that healthcare is not a heavily weighted factor in the CPI-W, whereas retirees on Social Security tend to spend a large portion of their income on medical expenses.
Meanwhile, healthcare inflation has outpaced broad inflation in recent years. And increasing Medicare costs in the new year are likely to leave many Social Security beneficiaries with less buying power overall.
Navigating the cost increase: Essential budgeting for the new year
Seniors who rely heavily on Social Security often feel financially strained when Medicare costs increase, especially at times when their COLA is only mediocre. If you’re worried about covering all of your essential needs in 2026, including healthcare, it’s important to get a handle on the situation.
First, figure out exactly how much your Social Security benefits will increase once your upcoming COLA kicks in. Next, see how much your Medicare costs are rising in total.
In addition to paying more for Part B, you may be subject to premium increases for your Medicare Part D drug plan or Advantage plan. Your copays, or other out-of-pocket costs that are plan-specific, may be rising as well.
Once you’ve run the numbers on all of that, create a budget that allows you to stretch your retirement income further. If the numbers don’t seem to be working, you may have to look at either reducing some expenses or getting a part-time job.
The good news is that you’re allowed to work while collecting Social Security. And a higher earnings test limit in 2026 gives you more leeway to bring home a paycheck without risking having benefits withheld.
If things are really tight, extreme cost-cutting measures like downsizing or relocation are worth considering, unless you’re able to boost your income significantly with a job.
The reality is that healthcare costs, including Medicare, are more likely than not to rise in future years, rendering Social Security COLAs less useful. It’s important to have a plan to cover those costs, and relying on COLAs alone is probably not going to cut it.
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