Social Security income is foundational for most retirees. Since 2002, annual surveys by Gallup have shown that between 80% and 90% of retired-worker beneficiaries rely on their payout to cover some portion of their expenses.
For aged beneficiaries, there are few announcements more anticipated than the annual cost-of-living adjustment (COLA). While this reveal typically occurs between the 10th and 15th of October, it was delayed this year due to the record-long federal government shutdown.
But Social Security's COLA isn't the only important reveal some retired recipients have been awaiting. For dual enrollees -- Social Security beneficiaries who are enrolled in traditional Medicare -- the Medicare announcement outlining premiums for the upcoming year holds a high degree of importance.
The bad news for dual enrollees is that no silver lining awaits them in 2026.
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Social Security's 2026 COLA is doing something we haven't observed this century
The fabled COLA you're always hearing and reading about is the Social Security Administration's tool that helps beneficiaries avoid a loss of buying power over time.
For example, if the collective cost of a large basket of goods and services rises by 2% from one year to the next, Social Security benefits would have to increase by the same percentage. If they didn't, beneficiaries wouldn't be able to buy the same amount of goods and services. Social Security's COLA is effectively the "raise" passed along on a near-annual basis that attempts to mirror the effects of inflation (rising prices).
The final puzzle piece (the September inflation report) needed to calculate the 2026 cost-of-living adjustment was released on Oct. 24, which revealed a 2.8% raise would be headed the way of beneficiaries next year.
On a nominal basis, a 2.8% COLA is modest compared to the 5.9%, 8.7%, and 3.2% payout jumps Social Security beneficiaries enjoyed from 2022 through 2024. But on a relative basis, a 2.8% increase is higher than the 2.3% average COLA since 2010.
Social Security's 2026 COLA also represents a first-of-this-century moment for the program. Including the aforementioned raises from 2022 through 2024, as well as the 2.5% COLA beneficiaries received this year, it'll mark the first time in 29 years that COLAs have come in at 2.5% or above for five straight years. The last time this was observed was from 1988 to 1997, when COLAs ranged between 2.6% and 5.4% annually.
While Social Security's 2026 COLA continues a string of above-average increases since 2010, Medicare's latest announcement has likely knocked the wind out of the sails of most dual enrollees.
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Medicare's Part B premium snatches away any hope of a silver lining for dual enrollees
Social Security and Medicare work hand-in-hand to support our nation's retirees. The former is responsible for providing a financial floor to eligible recipients, while the latter is a federal health insurance program that's primarily for Americans aged 65 and older, making healthcare more affordable and accessible.
Whereas Medicare Part A (inpatient services) has no monthly premium for approximately 99% of individuals enrolled in this traditional program, Medicare Part B, which covers outpatient services such as doctor visits, does have a base monthly premium. For dual enrollees, their monthly Part B premium is almost always automatically deducted from their Social Security benefit.
In mid-June, the Medicare Trustees Report had estimated the Part B premium would rise by a scorching-hot 11.5% to $206.20 per month in the new year. If accurate, it would have marked the eighth time since 2002 that it rose by a double-digit percentage from the previous year.
On Nov. 14, the Centers for Medicare & Medicaid Services officially announced the 2026 premiums for Parts A and B. The tiny sliver of good news is that the actual Part B premium for the upcoming year, $202.90 per month, is slightly lower than the initial estimate from the Medicare Trustees Report. The bad news is that it still represents an eye-popping 9.7% year-over-year increase, driven by higher costs for physician-administered drugs and costlier outpatient care.
In 2023, dual enrollees experienced a rare event, with the Part B premium declining by roughly 3% from the previous year. This is one of only two years over the last quarter century where the Part B premium fell. Higher-than-expected program costs from a newly released Alzheimer's disease drug didn't materialize, allowing dual enrollees to retain more of their Social Security COLA that year.
But in the subsequent three years, this silver lining has been decisively missing. Social Security raises of 3.2%, 2.5%, and 2.8% from 2024 through 2026 compare to Medicare Part B premium hikes of 5.9%, 5.9%, and 9.7%, respectively. The 9.7% increase in 2026 could be especially challenging for lifetime low-earners, and may partially or fully offset their cost-of-living adjustment.
This nearly double-digit percentage increase in the Part B premium reflects a multidecade trend in which Social Security's near-annual COLAs have not adequately kept pace with the inflationary pressures faced by program recipients. As long as the costs that matter most to retirees are climbing at a faster pace than their Social Security income, it sets up a scenario where the purchasing power of a Social Security dollar can continue to decline.
