Retirees’ 2026 Social Security COLA might taste a little better after a recent government report.
If you watch the news on TV, you might feel like you see nothing but bad news. Network news organizations focus on negative stories because they drive ratings.
However, there’s actually plenty 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.
Image source: Getty Images.
Making the COLA taste a little better
Before I go any further, the aforementioned good news did not come from the Social Security Administration (SSA). It has ramifications for Social Security beneficiaries, though.
The good news I’m referring to was announced earlier in January by the U.S. 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 at the end of 2025, prices of goods and services increased at a lower rate than Social Security benefits.
This year’s Social Security COLA was significantly lower than the average historical increase of 3.7%. However, as long as retirees’ benefits grow at least as much as prices increase, the buying power of their Social Security checks won’t deteriorate.
Good news, but not great news
With all of this in mind, the December inflation report from the BLS was good news for retirees on Social Security. Unfortunately, though, it wasn’t 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’re retired, you’ve already paid the higher prices that this year’s COLA was intended to offset. Inflation in December 2025 that’s slightly lower than the 2026 COLA doesn’t really make the benefit increase more attractive.
Another factor further diminishes the impact of the December inflation data. The actual inflation retirees experience is often greater than the CPI or CPI-W numbers reflect. One key reason is that rapidly rising healthcare costs account for a larger share of retirees’ overall spending.
As a case in point, look at the Medicare Part B increases 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 chunk of the average $56 monthly benefit increase for retired workers resulting from the 2026 Social Security COLA.
In addition, the annual deductible for Medicare Part B beneficiaries rose 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 could offset roughly 78% of the 2.8% COLA for the average retiree.
Wait ’til next year
Perhaps the relatively moderate inflation levels reported for December 2025 will persist throughout 2026. Inflation could even decline.
However, there’s 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. Much 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 whether the 2.8% Social Security COLA was enough to cover the higher prices they incurred. Maybe they’ll have good news then, but maybe not.
