2026 Social Security COLA early retirees fail

• The Social Security COLA increased by 2.8% in 2026, but Medicare premiums increased from $185 to $202.90 (nearly 10%), consuming nearly a third of the average retiree’s $57.99 benefit increase.

• Health care inflation is outpacing the projected 2.4% average Social Security increase at 5.8% annually, meaning the COLA formula is failing to keep up with retirees’ purchasing power.

• Retirees should plan for COLAs that don’t keep up with cost increases and increase their savings accordingly.

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Social Security should be an important source of income for retirees. Unfortunately, retirees are being left out because of a major flaw in the benefits program. The downside is cost-of-living adjustments (COLAs) that help seniors ensure their benefits keep pace with inflation.

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In 2026, the COLA resulted in retirees receiving a 2.8% benefit increase. Unfortunately, retirees are already suffering from this conflict of interest, and this trend may continue and even worsen over time. Here’s why.

While retirees received a benefit increase in 2026 that was larger than their 2.5% increase in 2025, the sad truth is that a good chunk of that money didn’t even end up in their paychecks. And that’s because Medicare premiums have skyrocketed.

For those over age 65 who get insurance coverage through Medicare, Medicare premiums are taken directly from Social Security payments. And those premiums increase significantly in 2026, going from $185 in 2025 to $202.90 in 2026. This means that retirees saw their costs increase by almost 10%. And, for retirees receiving an average monthly Social Security benefit of $2,071 in 2026, the $17.90 in additional premiums took nearly a third of their $57.99 benefit increase.

With most of the COLA missing to cover one major expense, the conflict of interest will help seniors cope with all of their other rising expenses as inflation continues to hover above the 2.00% target set by the Federal Reserve.

This problem with rising Medicare premiums is just one of the many issues with increasing Social Security benefits. Unfortunately, the COLA formula is based on an inflation rate that measures how much the cost of goods and services increases each year for urban wage earners and clerical workers. This group has different spending habits than seniors, devoting less of their income to high-inflation areas such as medical insurance costs.

This trend is not going away. HealthView Services’ 2026 Retiree Health Care Costs Data Report recently revealed that health care-related inflation is expected to occur at an annual rate of 5.8% based on a 65-year-old couple retiring in 2026 with average health care costs. During this couple’s retirement, Social Security benefits are only expected to increase by about 2.4% on average.

That means a healthy 65-year-old couple would need about 84% of their Social Security benefits just to cover medical care, the report warns. And for younger workers, the numbers are even worse, with a healthy 55-year-old couple spending 104% of the average monthly Social Security on out-of-pocket medical care costs.

Clearly, with these numbers, the COLAs that are supposed to protect seniors are failing. Both current and future retirees should be aware of these issues and try to take steps to increase their savings so they will have enough to supplement Social Security when living costs decrease and the purchasing power of their benefits decreases.

Investing specifically for medical expenses in a Health Savings Account (HSA) is an option for those who qualify for one, but all future retirees need a plan to cope with the fact that COLAs will continue to hit them and Social Security benefits will take less over time.

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