As 2025 draws to a close, millions of Americans are preparing for the financial shifts that the New Year will bring. The Social Security Administration (SSA) officially announced the 2026 Cost-of-Living Adjustment (COLA) in October, confirming a modest but essential boost for beneficiaries. With inflation continuing to impact the cost of everyday goods, understanding exactly when these changes take effect and how they interact with rising Medicare premiums is crucial for retirees and SSI recipients planning their 2026 budgets.
The 2.8% Adjustment Confirmed
For 2026, Social Security benefits will increase by 2.8%. This adjustment is designed to help purchasing power keep pace with inflation. While this figure is lower than the historic highs seen in 2023, it remains slightly above the average increases of the past decade. For the average retired worker, this percentage translates to roughly $56 more per month, lifting the typical monthly benefit from approximately $2,015 to around $2,071. This increase applies to retirement, disability, and survivor benefits, ensuring that nearly 70 million Americans see a change in their monthly deposits.
How the COLA Was Calculated
The 2026 COLA was determined based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) data from the third quarter of 2025 (July, August, and September). The SSA compares the average CPI-W for this period against the average from the same quarter in the previous year. The resulting percentage difference determines the COLA. This year, the data reflected a steady but cooling inflation environment, leading to the 2.8% figure—a stabilizing number after the volatile economic shifts of previous years.
Medicare Part B Premiums Eat Into the Raise
One of the most significant factors affecting the “real” value of the 2026 COLA is the concurrent rise in Medicare Part B premiums. For 2026, the standard monthly Part B premium has increased to $202.90, up from $185.00 in 2025. Since these premiums are typically deducted automatically from Social Security checks, the net increase beneficiaries see in their bank accounts will be lower than the gross COLA amount. For many, the $17.90 rise in Medicare premiums will absorb about one-third of their $56 monthly COLA boost.
2025 vs. 2026: Benefit and Cost ComparisonThe following table provides a clear breakdown of the changes beneficiaries can expect starting in January.
| Feature | 2025 Rates | 2026 Rates | Change |
| COLA Increase | 2.5% | 2.8% | +0.3% |
| Average Retiree Benefit | ~$2,015 | ~$2,071 | +$56.00 |
| Medicare Part B Premium | $185.00 | $202.90 | +$17.90 |
| Max Taxable Earnings | $176,100 | $184,500 | +$8,400 |
| SSI Individual Max | $967 | $994 | +$27.00 |
Timeline for Payments and Notices
Beneficiaries should mark their calendars for specific dates regarding these updates. The SSA began making COLA notices available online via the “Message Center” in my Social Security accounts in early December. Mailed notices are currently arriving in mailboxes throughout the month. The actual increased payments will follow the standard schedule:
SSI Recipients: Will receive their first increased payment on December 31, 2025 (since January 1 is a holiday).
Social Security Beneficiaries: Will see the adjustment in their January 2026 payments, which are distributed on the second, third, or fourth Wednesday of the month, depending on their birth date.
Changes to the “Earnings Test” Limits
For those who continue to work while receiving early retirement benefits, the 2026 update brings higher earnings thresholds.16 The annual limit for those under full retirement age (FRA) has risen to $24,480.17 If you earn above this amount, $1 will be withheld for every $2 earned.18 For those reaching their FRA in 2026, the limit is substantially higher at $65,160, with a more lenient withholding rate.19 These adjustments allow working retirees to earn slightly more wages without triggering benefit reductions compared to last year.
Tax Implications for Higher Earners
It is also important to note changes on the taxation side. The maximum amount of earnings subject to Social Security payroll taxes has increased to $184,500 for 2026.20 This means higher-income workers will pay Social Security taxes on more of their income than they did in 2025.21 This adjustment is automatic and indexed to the growth in average wages across the economy, ensuring the program’s funding scales with national income levels.
Summary of What to Expect
In summary, while the 2.8% increase is a welcome development, the rising cost of healthcare continues to be a counterbalance.22 Beneficiaries are advised to review their COLA notice carefully to see their exact net benefit amount after Medicare deductions. By understanding these figures now, retirees can better plan their household budgets for the coming year, accounting for both the extra income and the increased medical premiums.
FAQs
1. When will I receive my first higher payment?
Social Security retirement beneficiaries will receive their first increased payment in January 2026.24 SSI recipients will receive their increased payment slightly earlier, on December 31, 2025.25
2. Why is my increase less than 2.8%?
Your gross benefit increased by 2.8%, but if you have Medicare Part B deducted from your check, the premium increase (now $202.90) reduces your net deposit.
3. Do I need to apply for the COLA increase?
No. The Cost-of-Living Adjustment is automatic.26 You do not need to contact the SSA or file any paperwork to receive the higher benefit amount.
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