Social Security Retirees Still Good News From Uncle Sam

If you watch the news on TV, you may feel like you see nothing but bad news. Network news organizations focus on negative stories because they drive ratings.

However, there is actually a lot of good news around if you look for it. As a case in point, retirees on Social Security just got some good news from Uncle Sam.

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Before I go any further, the aforementioned good news did not come from the Social Security Administration (SSA). However, it has ramifications for Social Security beneficiaries.

The good news I’m referring to was announced earlier in January by the US Bureau of Labor Statistics (BLS). Each month, the BLS releases inflation data for the previous month. And the December numbers should be encouraging for retirees.

According to the BLS, the Consumer Price Index (CPI) for December 2025 was 2.7%. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), the inflation metric that SSA uses to calculate the annual Social Security cost of living adjustment (COLA), was 2.6%.

Why are these numbers good news for retirees? The Social Security COLA for 2026 is 2.8%. At least through the end of 2025, the prices of goods and services increased at a lower rate than Social Security benefits.

This year’s Social Security COLA was well below the historical average increase of 3.7%. However, as long as retirees’ benefits grow at least as much as prices rise, the purchasing power of their Social Security checks will not deteriorate.

With all of this in mind, the December inflation report from the BLS was good news for Social Security retirees. Unfortunately, however, it was not great news.

For one thing, SSA calculated the benefit increase that retirees received in 2026 based on inflation data (using the CPI-W metric) for the third quarter of 2025. COLAs are always after the fact. In other words, if you are retired, you have already paid the higher prices that this year’s COLA was intended to offset. Inflation in December 2025 which is slightly lower than the 2026 COLA does not make the benefit increase more attractive.

Another factor further dampens the impact of December’s inflation data. The actual inflation experienced by retirees is many times greater than the CPI or CPI-W numbers reflect. A key reason is that rapidly rising health care costs account for a larger share of overall retiree spending.

As a case in point, look at the increases in Medicare Part B for this year. Standard Medicare Part B premiums jumped 9.7% year over year, from $185 to $202.90. This $17.90 increase negates a significant portion of the average $56 per month benefit increase for retired workers resulting from the 2026 Social Security COLA.

Additionally, the annual deductible for Medicare Part B beneficiaries increased 10.1% year over year, from $257 in 2025 to $283 in 2026. Any retiree who meets their Part B deductible will pay another $26 this year. Higher Medicare Part B costs alone can offset roughly 78% of the 2.8% COLA for the average retiree.

Perhaps the relatively moderate inflation levels reported for December 2025 will persist throughout 2026. Inflation may even decrease.

However, there is considerable uncertainty. Some experts predict that the impact of President Trump’s tariffs will be greater this year than last year. The president is also threatening to impose steep tariffs on imports from Canada and a 25% tariff on South Korean imports. Most of the higher costs associated with these higher tariffs, if implemented, will likely be borne by American consumers.

Ultimately, retirees will have to wait until next year to determine if the 2.8% Social Security COLA was enough to cover the higher prices they incurred. Maybe they will have good news then, but maybe not.

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Social Security Retirees Just Got Some Good News From Uncle Sam was originally published by The Motley Fool