The Social Security Administration’s announcement of a 2.8% cost-of-living adjustment (COLA) for 2026 was welcome news for millions of retirees — at first glance. But when paired with projected Medicare premium increases, the reality looks far less generous.
After factoring in the expected rise in Medicare Part B premiums to roughly $206.50/month (up from $185 in 2025), the net benefit gain for most retirees will likely fall to around 1.7%.
That’s the real story — and a vital planning signal for advisors and retirees alike.
1. The True Math of a “Raise”
Let’s unpack what the numbers mean in practice:
2025 2026 (Projected) Change
Average Social Security Benefit $2,008 $2,064 +$56 (+2.8%)
Medicare Part B Premium $185 $206.50 +$21.50 (+11.6%)
Net Monthly Gain After Part B ≈ $34.50 +1.7% Net
In other words, for the average retiree, only about 60% of the COLA increase actually remains after the new Medicare costs are deducted. That equates to less than $1.15 per day of new purchasing power.
This modest net gain highlights two key realities:
- Healthcare inflation continues to outpace benefit increases.
- Long-term income planning, not COLA alone, determines retirement security.
2. Re-Evaluate Medicare Supplemental Coverage
With open enrollment now underway, retirees have a powerful opportunity to offset rising Medicare costs by trimming unnecessary coverage expenses.
Many retirees overpay for their Medigap (Supplemental) or Part D plans — sometimes by $40–$80/month or more, depending on location and plan type. According to KFF data, the average Medigap Plan G premium ranges from $120–$250 per month, and many policyholders never shop around after initial enrollment.
For some retirees, simply changing carriers or plan levels could erase the entire Medicare premium increase — or more.
3. Why the Long-Term Bucket Matters More Than Ever
Even after COLA adjustments, Social Security’s purchasing power has declined roughly 30% since 2000 (per the Senior Citizens League).
That erosion is why the bucket strategy continues to be one of the most practical frameworks for long-term stability.
The 2026 COLA provides an ideal check-in moment: Are your long-term buckets adequately positioned to outpace inflation for the next decade?
4. Positioning the Opportunity
When explaining the COLA and Medicare interaction to clients (or thinking it through for yourself), consider framing it like this:
“Yes, your Social Security check will rise by 2.8%, but after Medicare, your actual raise is closer to 1.7%. Let’s make sure we recover the difference — and then some — through smarter health plan selection and long-term growth positioning.”
That reframes a “modest raise” into a strategic opportunity.
5. Key Takeaways
- Nominal COLA (2.8%) – Medicare impact (≈ 1.1%) = Net 1.7% increase.
- Open enrollment = leverage point. Review Medigap and Part D premiums to offset new costs.
- Don’t rely on " Diet COLAs" for inflation protection. Keep long-term growth assets working inside a bucket framework.
- Revisit your plan annually. Use each COLA announcement as your “annual review trigger.”
Conclusion
The 2026 Social Security increase may make headlines — but it won’t meaningfully move the needle on retirees’ purchasing power once Medicare costs are factored in.
Advisors and retirees who view this as a planning cue rather than an inflation hedge will stay ahead of the curve: reviewing supplemental costs now, fine-tuning income buckets, and ensuring long-term growth strategies continue to defend against inflation in the years ahead.