Don’t start counting your extra money just yet.
In just a few days, the Social Security Administration (SSA) will be making a huge announcement about changes to the program in 2026. A new earnings-test limit will be shared, as well as the maximum monthly benefit.
Perhaps the most anticipated update the SSA will share, however, is an official cost-of-living adjustment, or COLA, for 2026.
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Each year, Social Security benefits are eligible for a raise, based on inflation. Without COLAs, beneficiaries would be pretty much guaranteed to lose buying power over time.
Initial projections are calling for a 2.7% COLA for 2026, but that number doesn’t take inflation data from September into account. If inflation rose substantially last month, seniors could be looking at an even larger boost to their Social Security checks in 2026.
While a 2.7% or higher COLA might seem like something to celebrate, you may want to temper your excitement if you count on Social Security for income. That’s because that COLA may not be yours to keep in full.
Will a Medicare increase eat into your COLA?
Seniors who are enrolled in Medicare and Social Security at the same time pay their premiums for Part B, which covers outpatient care, directly out of their monthly benefits. This means that if the cost of Medicare increases in 2026, it will eat into whatever COLA retirees receive.
In 2025, the standard monthly Part B premium rose from $174.70 to $185. But based on projections from the Medicare Trustees released earlier this year, the standard Part B premium for 2026 could be a whopping $206.50 — an increase of $21.50. It also could cause many seniors to lose out on a good chunk of their Social Security raises.
As of August, the average monthly Social Security benefit for retired workers was about $2,008. A 2.7% COLA would result in a boost of about $54 per month. However, if Medicare Part B goes up by $21.50 per month, the typical Social Security benefit might only rise by around $32.50, in practice.
It’s best to have income outside of Social Security
Until the SSA makes an official COLA announcement on Oct. 15, we won’t know for sure what next year’s COLA will amount to. However, even if it’s fairly generous, a large uptick in Part B costs could wipe out much of it.
That’s why it’s important not to be too reliant on Social Security COLAs to keep up with inflation. A better bet? Save well for retirement, and set yourself up with a portfolio of assets that continues to generate income for you.
Those assets could include a mix of stocks and bonds. The stocks should ideally provide growth and income in the form of dividend payments. The bond portion, meanwhile, may be more stable, providing you with steady income you can use to supplement your monthly Social Security checks.
There are other options for generating retirement income, too, like working part-time. And that part-time work doesn’t have to come in the form of a boring job with a strict, preset schedule.
Thanks to the gig economy, you can explore different options for earning some money. You may find that, on top of the extra income being helpful, it’s nice to have a reason to get out of the house on a regular basis and socialize with other people.
No matter what strategy you choose, the key is to have some income outside of Social Security — because while the program’s COLAs do help seniors keep up with inflation to some degree, they also have their fair share of shortcomings.