It’s been a busy few weeks for retirees, with Social Security announcing the 2026 cost-of-living adjustment (COLA) and monthly Medicare premiums being revealed for the coming year.
The 2026 Social Security COLA will do something not seen since the late 20th century.
The Part B premium is increasing rapidly, and is set to partially or fully offset the 2026 Social Security COLA for traditional Medicare enrollees.
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Social Security income is fundamental for most retirees. Since 2002, an annual survey by Gallup has shown that between 80% and 90% of the beneficiaries of retired workers rely on their payment 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 disclosure typically occurs between October 10 and 15, this year it was delayed due to the record shutdown of the federal government.
But the Social Security COLA isn’t the only big reveal that some retired recipients have been waiting for. For dual enrollees — Social Security beneficiaries who are enrolled in traditional Medicare — the Medicare announcement outlining premiums for the coming year holds a high degree of importance.
The bad news for dual registrants is that no silver lining awaits them in 2026.
Image source: Getty Images.
The fabled COLA you keep hearing and reading about is the Social Security Administration’s tool to help beneficiaries avoid a loss of purchasing 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 did not do so, the beneficiaries would not be able to buy the same amount of goods and services. The Social Security COLA is effectively the “increase” passed on an almost annual basis that tries to reflect 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 October 24, revealing that a 2.8% increase would be headed the way of beneficiaries next year.
On a nominal basis, a COLA of 2.8% is modest compared to the 5.9%, 8.7% and 3.2% payment jumps enjoyed by Social Security beneficiaries from 2022 to 2024. But on a relative basis, a 2.8% increase is higher than the average 2.3% COLA since 2010.
The 2026 Social Security COLA also represents a first-of-this-century moment for the program. Including the aforementioned increases from 2022 to 2024, as well as the 2.5% COLA beneficiaries received this year, it will mark the first time in 29 years that COLAs have come in at 2.5% or more for five straight years. The last time this was observed was from 1988 to 1997, when COLAs varied between 2.6% and 5.4% per year.
While Social Security’s 2026 COLA continues a streak of above-average increases since 2010, the latest Medicare announcement likely knocked the wind out of the sails of most dual enrollees.
Image source: Getty Images.
Social Security and Medicare work hand in hand to support our nation’s retirees. The former is responsible for providing a financial level to eligible recipients, while the latter is a federal health insurance program that is primarily for Americans 65 years of age or older, making health care 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 visits to the doctor, he does they have a monthly base 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 estimated that the Part B premium would increase by a whopping 11.5% to $206.20 a month in the new year. If accurate, it would be the eighth time since 2002 that it has increased by double-digit percentages from the previous year.
On November 14, the Centers for Medicare & Medicaid Services officially announced the 2026 premiums for Parts A and B. The small piece of good news is that the current Part B premium for the coming 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 a 9.7% year-over-year increase, driven by higher costs for prescription drugs and more expensive outpatient care.
In 2023, dual enrollees experienced a rare event, with the Part B premium decreases by about 3% from the previous year. This is one of only two years over the past quarter century where the Part B premium has fallen. Higher-than-expected program costs from a newly released Alzheimer’s disease drug did not materialize, allowing dual enrollees to keep more of their Social Security COLA that year.
But in the following three years, this silver was missing decisively. Social Security increases of 3.2%, 2.5%, and 2.8% from 2024 to 2026 compared to Medicare Part B premium increases of 5.9%, 5.9%, and 9.7%, respectively. The 9.7% increase in 2026 could be especially challenging for low lifetime earners, and could partially or fully offset their cost of living adjustment.
This near-double-digit percentage increase in the Part B premium reflects a multi-decade trend in which Social Security’s near-annual COLAs have not adequately kept pace with the inflationary pressures facing program recipients. As long as the expenses that matter most to retirees are increasing at a faster pace than their Social Security income, this sets up a scenario where the purchasing power of a Social Security dollar could continue to decline.
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Medicare just announced its 2026 premiums, and it’s Bad News for Social Security’s Double Bill was originally published by The Motley Fool
