Social Security is the foundation of many seniors' retirement. Some 62% of retirees say their monthly benefits represent a major source of income, according to the most recent iteration of a national Gallup poll.
That's the highest reading in the survey's 24-year history. It's also worth noting that fewer than 30% of respondents expected Social Security to be a major source of income in retirement 20 years ago. So, you may be underestimating the importance of Social Security to your own retirement.
Unfortunately, many Social Security recipients who rely on their monthly payments are finding that they aren't receiving as much from the government program as they're accustomed to. Despite the annual COLA increasing their benefits every year, many haven't received the entirety of those raises.
That's all due to one particular factor that eats into many retirees' benefits, and the problem's only getting worse.
Image source: Getty Images.
The hidden cost that's eating into many retirees' benefits
Social Security isn't the only government program designed to ensure the financial stability of our nation's seniors. The government-sponsored health insurance program, Medicare, is also available to anyone age 65 and older. The government automatically enrolls those receiving Social Security benefits prior to age 65 when they become eligible for Medicare, but many seniors find it beneficial to enroll as soon as possible.
While Medicare is a government-sponsored insurance program, it still requires enrollees to pay monthly premiums for some coverage. Medicare Part B is one of the most important pieces of the program, covering doctor's visits, outpatient hospital care, and preventative services, among other common medical expenses.
The standard monthly premium for the insurance in 2026 will be $202.90. Those with higher incomes are asked to pay a higher amount. For those receiving Social Security benefits, the government deducts that premium directly from their monthly payment before sending it.
Unfortunately for seniors enrolled in both Social Security and Medicare, they've seen the price of Part B premiums climb faster than their overall Social Security benefits in each of the last three years. Here's a table comparing the COLAs for 2024, 2025, and 2026 to the Part B premium increases.
| Year | Part B Premium Increase | COLA |
|---|---|---|
| 2024 | 5.9% | 3.2% |
| 2025 | 5.9% | 2.5% |
| 2026 | 9.7% | 2.8% |
| Cumulative | 23% | 8.7% |
Data source: Centers for Medicare & Medicaid Services, Social Security Administration. Calculations by Author.
As you can see, Part B premiums have drastically outpaced the increases in Social Security benefits from inflation over the last three years. But Medicare isn't a profit-driven machine; it's not trying to squeeze more money out of seniors by raiding their Social Security benefits. Part B premiums are set to cover 25% of the projected program costs, so premiums rise alongside the program's spending per enrollee. In other words, medical care costs are rising much faster than overall inflation.
That simple, but cruel, math means many seniors are finding that the amount they receive from Social Security after their Medicare premiums are deducted just doesn't go as far as it used to. In fact, the majority of retirees say this year's COLA isn't enough. And the problem may be about to get even worse.
What the future may hold for Social Security and Medicare
The challenges facing Medicare, resulting in higher Part B premiums, are only set to worsen as new specialized drugs and therapies become more expensive, hospitals consolidate and increase their pricing, and an aging population lives longer. That means more spending per enrollee and higher premiums.
In fact, the Medicare trustees project Medicare Part B's standard premium will reach $347.50 by 2034. That's an average annual increase of nearly 7% from the 2026 premium. That's almost certain to outpace average inflation, and the annual Social Security COLA by extension, during that period. That means the same cruel math that's cutting into Social Security benefits today will continue well into the next decade, and it's unclear whether the trend will slow down.
The only protection beneficiaries have against rising Medicare premiums is the hold harmless provision, which prevents the rise in premiums from decreasing your monthly benefit from one year to the next. That will go into effect for anyone receiving less than $639 per month in total benefits this year. Importantly, though, you must already be receiving benefits for it to protect you against premium increases.
Retirees need to be prepared for a decade of less purchasing power from Social Security as Medicare premiums increase and eat into their annual COLAs. While the program might be the best option for many, the unfortunate truth is that the costs that impact seniors most are rising faster than their benefits.
