The COLA: why a raise doesn’t feel like one
Social Security rose 2.8% this year. Then Medicare took about a third of it back before the money ever reached anyone — which is the part the headlines skip.
Every October the Social Security Administration announces the cost-of-living adjustment for the following year, it leads the news for a day, and then a great many people notice in January that their deposit didn't grow by anything like what was announced.
They're not imagining it. The arithmetic is public, it just never makes the headline.
| 2.8% | The COLA announced on 24 October 2025, effective with January 2026 payments. |
|---|---|
| $2,015 → $2,071 | The average retired worker’s monthly benefit — an increase of about $56. |
| $185.00 → $202.90 | The standard Medicare Part B premium over the same period — an increase of $17.90, deducted straight from the benefit. |
| About $38 | What is actually left of the average increase once Part B is taken out. |
| ~71 million | People receiving the adjustment. |
| Next announcement | October 2026, for benefits beginning January 2027. |
The part that gets skipped
For most retirees, the Part B premium is deducted from the Social Security payment before it arrives. So the announced COLA and the money you receive are two different numbers, and the gap between them is a Medicare premium increase that gets announced separately, weeks later, with far less coverage.
This year that's $17.90 of an average $56 — a bit under a third of the raise, gone before it lands. For someone with a below-average benefit, the proportion is larger, because the Part B increase is a flat dollar amount while the COLA is a percentage. The smaller your benefit, the more of your raise Medicare takes.
The COLA is a percentage. The Part B increase is a flat dollar amount. That asymmetry means the smallest benefits lose the largest share of their raise.
One protection worth knowing about: the hold harmless provision generally prevents your Part B increase from exceeding your COLA increase in dollar terms, so most people's net Social Security payment shouldn't actually fall year over year. It protects you from going backwards. It doesn't get you the raise you read about.
Why the number is what it is
The COLA isn't a policy decision or a negotiation. It's a formula: the change in a price index called CPI-W — the Consumer Price Index for Urban Wage Earners and Clerical Workers — measured from the third quarter of one year to the third quarter of the next.
The name gives away the long-running criticism. CPI-W tracks the spending of working people. It is not built around what retirees actually buy, and retirees spend a much larger share of their income on medical care and housing — categories that have generally risen faster than the basket as a whole.
An alternative index, CPI-E, weights an older household's spending and has historically run slightly higher in most years. Proposals to switch to it come up regularly in Congress and have not passed. Whatever you think of that debate, it explains the persistent gap between an official adjustment and the felt experience of costs.
What the COLA does and doesn’t touch
- It applies to Social Security retirement, survivor and disability benefits, and to SSI.
- It is permanent and compounding — it raises the base your future adjustments are calculated from. Over a long retirement this matters far more than any single year's number.
- It does not raise most private pensions, which frequently have no inflation adjustment at all.
- It does not change the income thresholds at which Social Security benefits become taxable. Those are not indexed, so each COLA pushes a few more people over them — a slow, quiet effect that catches households by surprise.
What to do with the announcement
- When the number lands in October, wait for the Part B premium before doing any arithmetic. The two together are the real figure.
- Check your December statement at ssa.gov for the actual January amount rather than estimating it.
- If most of your income is a pension without a COLA, remember that its buying power falls every single year. This is the quiet risk in an otherwise comfortable retirement.
- Watch the taxation thresholds. They do not move, so a large COLA can incidentally make more of your benefit taxable.
- Ignore the annual round of “the COLA is a scam” and “benefits are being cut” posts. The formula is published, and the number is arithmetic, not a decision someone made about you.
2.8% on a $2,015 benefit is $56. Medicare takes $17.90 of it. What arrives is about $38 a month, and whether that keeps pace with your own costs depends on things CPI-W was never designed to measure.
None of which makes the adjustment worthless — it compounds, it's permanent, and pensions without one lose ground every year by comparison. It's just a good deal smaller than the headline, and now you know exactly where the difference went.
This is general information, not personal advice. We report the rules, the numbers and the deadlines as clearly as we can. We don't know your income, your state, your health or your family — and all four can change the answer. Treat this as a good place to find the right questions, not a substitute for someone looking at your actual situation.
Where these facts come from
Checked against primary sources on 10 August 2026. Dollar limits and program rules change — if you're reading this well after that date, verify the numbers at the links below.
- SSA — 2026 cost-of-living adjustment fact sheet — https://www.ssa.gov/news/en/cola/factsheets/2026.html
- SSA — Social Security announces 2.8 percent benefit increase for 2026 — https://www.ssa.gov/news/en/press/releases/2025-10-24.html
- CMS — 2026 Medicare Parts A & B premiums and deductibles — https://www.cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles
- SSA — Income taxes and your Social Security benefits — https://www.ssa.gov/benefits/retirement/planner/taxes.html
Edward Silva
Edward spent more than forty years as a computer professional — long enough to pick up one useful occupational habit: when somebody hands you a summary, go and read the actual documentation. He started The Second Half Guide after noticing that most writing aimed at people his age was either talking down to him or quietly selling him something, and that the plain facts — the dates, the thresholds, the dollar figures — were somehow the hardest part to find.
He's married, with two grown sons, both married themselves. He is not a financial adviser, an attorney or an insurance agent, and this site doesn't tell you what to do with your money. It tells you what the rules actually say, and links to where he checked.