After the July inflation data was released, the latest estimates from the Senior Citizens League are calling for a Social Security cost-of-living adjustment, or COLA, of 2.7% for beneficiaries in 2026. This is one-tenth of one percentage point greater than the prior estimate and would be a raise from the 2.5% COLA that went into effect this year. https://seniorsleague.org/tscl-cola-projection-8-25/
Social Security COLAs help retirees and other beneficiaries keep up with the rising costs of goods and services. And while a higher estimated COLA might sound like good news, there are a couple of good reasons it might not be enough. Here's what all retirees and other Social Security beneficiaries should know.
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Medicare premiums could consume a lot of the COLA
The first reason the 2026 COLA might not be enough is Medicare premiums. Specifically, Social Security beneficiaries who are over 65 and enrolled in Medicare typically pay their Medicare Part B premiums directly from their Social Security checks.
Here's the key point. Although the COLA is expected to add 2.7% to Social Security benefits, Medicare Part B premiums are expected to rise by 11.6%, from $185 per month this year to $206.50 per month in 2026.
The average retired worker would get a $54 monthly increase from a 2.7% COLA. However, $21.50 of this would be consumed by Medicare premium increases. This would make the effective increase $33.50 per month that can be used to help pay for living expenses.
This isn't exactly a unique occurrence for 2026. Over the past five years, Social Security COLAs have produced a cumulative increase of about 23% for beneficiaries. In the same period, Medicare Part B premiums have risen by 28%, consuming more and more of the Social Security checks of Medicare beneficiaries.
The CPI-W isn't the best inflation metric for the elderly
When calculating the Social Security COLA, the inflation metric that is used is a variation of the consumer price index called the CPI-W. This increased by 2.5% year over year in July and is intended to measure inflation as it affects workers. This creates an obvious issue -- most Social Security beneficiaries are retired, and different goods and services affect them differently.
There's another metric called the CPI-E that is specifically designed to measure the effects of inflation on the elderly. Just to name a couple examples, seniors tend to spend a greater portion of their income on healthcare and housing than the average American household. In July, the year-over-year inflation rate for outpatient hospital services was 6.4%. Housing costs have increased by 3.7% over the past year. Overall, the CPI-E increased by 2.9% year over year in July, 0.4% more than the CPI-W.
When will we know the 2026 Social Security COLA for sure?
As it stands, because of a combination of expected Medicare premium increases and senior-specific costs rising faster than the Social Security Administration's preferred inflation metric, the COLA might not do its intended job of helping seniors keep up with the cost of living.
As a final point, it's important to realize that we don't know for sure what the COLA will be for 2026. It's based on third-quarter CPI-W data (July, August, and September), and we've only seen one of those monthly reports so far. We'll know for sure how much of a raise seniors will get when finalized third quarter inflation data is available in mid-October.
