After the release of the July inflation data, the Senior Citizens League has updated its projections for the 2026 Social Security cost-of-living adjustment (COLA).
The new estimate is 2.7%, a slight increase from the prior estimate of 2.6%. While this might sound like good news, there are important factors to consider that may reduce the actual benefit of the raise.
The Impact of Rising Medicare Premiums
One key issue that could eat into the COLA increase is rising Medicare Part B premiums. Beneficiaries aged 65 and older typically have their Medicare premiums deducted directly from their Social Security checks.
In 2026, Medicare premiums are expected to rise 11.6%, from $185 per month to $206.50 per month. This will leave a large portion of the 2.7% COLA increase consumed by these higher premiums.
For example, the average retired worker will see a $54 increase in their monthly Social Security benefit. However, with $21.50 of this going to the Medicare premium increase, the effective raise would only be $33.50 per month to cover living expenses.
This scenario has become common in recent years: Social Security COLAs have produced a 23% increase over the last five years, but Medicare premiums have increased by 28% in the same period, continuing to absorb more of beneficiaries’ Social Security checks.
The CPI-W vs. the CPI-E: Measuring Inflation for Seniors
The CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) is used to calculate the Social Security COLA, but it doesn’t always reflect the specific needs of retirees.
For example, seniors tend to spend a larger portion of their income on healthcare and housing, both of which have seen inflation rates higher than those measured by the CPI-W.
For instance, outpatient hospital services saw a 6.4% increase in inflation, and housing costs rose by 3.7% over the past year. In contrast, the CPI-W rose by only 2.5% in July, while the CPI-E (a metric that tracks inflation specifically for the elderly) rose by 2.9%.
This shows that the CPI-W may not fully capture the rising costs experienced by seniors.
When Will We Know the Final 2026 COLA?
The 2026 COLA will be based on third-quarter CPI-W data (July, August, and September). As of now, only one of those months has been reported, so the final COLA adjustment won’t be confirmed until mid-October. The third-quarter data will provide the final calculation of how much the Social Security raise will be for seniors.
Maximizing Social Security Benefits: A $23,760 Opportunity
If you’re concerned about retirement savings, there are strategies to maximize your Social Security benefits. Many retirees overlook opportunities that could boost their income by up to $23,760 per year. Learning how to optimize your Social Security benefits could help you retire with more confidence and peace of mind.
To learn more about how to boost your Social Security benefits, consider exploring Stock Advisor’s strategies.
