The Hidden Reason the Social Security COLA Is Worth More to Some Retirees

The COLA is the same for all seniors, but not every retiree will benefit equally from it.Each year, retirees eagerly await the news of the Social Security Cost of Living Adjustment (COLA). COLAs are built into Social Security to protect retirees from losing the value of their benefits due to inflation. Since the COLA results in retirees receiving a larger check in the coming year, the Cost of Living Adjustment is often referred to as a Social Security raise. The good news is that retirees will get this raise next year. In fact, it will be a larger raise than it was in 2025. At the start of this current year, retirees saw their benefits increase by 2.5%, while in 2026, they'll see their Social Security checks increase by 2.8%. However, this benefit increase won't apply to or benefit every senior equally. Some people will see more of an increase in benefits than others -- and that's not just because the benefit increase is calculated on a percentage basis. Here's why. Image source: Getty Images. The surprising reason some retirees benefit more from the COLA than others The fact that some retirees will benefit more from the COLA than others may come as a surprise, given that all Social Security benefit recipients see their payments increase by the same percentage.Advertisement But there's a clear reason why this is happening. Seniors who receive health insurance coverage through Medicare will benefit less from the COLA than others because Medicare recipients will see some of their payments disappear, while those who are not signed up for Medicare coverage will not have this happen to them. Retirees become eligible for Medicare once they reach age 65, and the vast majority of seniors sign up for this insurance coverage at that time because there are penalties for delayed signup. And, for most seniors who sign up, Medicare premiums are taken directly out of their retirement checks. When those premiums go up, as they are doing in 2026, seniors lose a portion of their benefits due to the increase in premiums. So, those seniors who are paying Medicare premiums end up keeping less of their raise than those who don't have this added expense. How big a bite are Medicare premiums taking out of the Social Security raise? Unfortunately, Medicare premiums are increasing substantially next year, so they'll significantly reduce the amount of the Social Security raise that retirees get to keep. Seniors who pay the standard premiums for Medicare will see premiums increase to $202.90 per month, up from $185 in 2025. That's a $17.90 per month increase. This means a retiree collecting a $2,000 benefit who gets a $56 raise loses about a third of their extra Social Security money to pay for their added Medicare costs. Retirees who aren't paying for Medicare premiums won't see a third of their COLA disappear. They'll have more money coming in with each check, so they may not need to withdraw as much from their retirement plans. Of course, most seniors have some kind of insurance, and their other insurance premiums may also rise next year, so Social Security recipients who aren't on Medicare may have to use some of their extra Social Security money to pay their own insurer more. However, those without Medicare and obtaining coverage through other sources may have more options when shopping for coverage. Because of that added flexibility, it's possible they could avoid facing the big premium increases that are eating up about a third of a standard COLA increase. Ultimately, retirees who will lose part of their COLA due to rising Medicare premiums should consider this in their retirement planning for the upcoming year. It'll be important to recognize that part of the COLA will be offset, and the raise won't increase checks by the full 2.8%. Anyone facing this issue will need to adjust their budget to account for the additional amount they're receiving to avoid taking too much from their 401(k) or IRA and ending up with too little money in their later years.About the AuthorChristy Bieber is a contributing Motley Fool retirement and Social Security expert covering retirement planning, 401(k)s, IRAs, and other personal finance topics. Christy has written about finance since 2008 and previously taught business courses at Bryant & Stratton College. She holds a law degree from UCLA and a bachelor’s degree in English, media, and communication with a certificate in business management from the University of Rochester. In law school, she earned three CALI Awards for Excellence for the highest scores in civil procedure and contract law exams.TMFChristyBRead NextDec 17, 2025 •By Maurie BackmanShould You Downsize in 2026? 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