Each year, Social Security benefits may increase with a cost-of-living adjustment (COLA), but higher Medicare premiums can reduce how much of that raise reaches your monthly budget. Since both are calculated differently, they do not necessarily move at the same rate. Comparing the dollar value of your COLA with changes in Medicare costs can show how much additional income you will have left.
A financial advisor can help you project how Social Security COLAs and Medicare premium changes could affect your retirement income.
How Social Security COLA Works
Social Security bases its COLA on changes in the CPI-W, which tracks the price changes for a specific basket of goods and services. The adjustment generally affects benefits received beginning in January. The same COLA percentage applies broadly, but your dollar increase depends on the size of your benefit.
Recent COLAs were 8.7% for 2023, 3.2% for 2024, 2.5% for 2025 and 2.8% for 2026. 1
How Medicare Premiums Actually Increase
Medicare Part B does not follow the CPI-W. The standard premium rose from $174.70 in 2024 to $185 in 2025 and $202.90 in 2026. 2 CMS attributed those increases in part to projected healthcare prices and utilization.
Income can raise the bill further. In 2026, income-related monthly adjustment amount (IRMAA) surcharges begin above $109,000 of modified adjusted gross income (MAGI) for most single filers and $218,000 for married couples filing jointly. 3 Part D premiums vary by plan, and IRMAA can add another surcharge.
When COLA Doesn’t Cover Premium Hikes
In 2024, the 3.2% COLA was smaller than the 5.9% increase in the standard Part B premium. The dollar amounts tell a more useful story.
For someone receiving $2,000 per month:
| 2024 Change | Calculation | Monthly Amount |
|---|---|---|
| Social Security COLA | $2,000 × 3.2% | $64.00 |
| Part B premium increase | $174.70 − $164.90 | $9.80 |
| Raise remaining after Part B increase | $64.00 − $9.80 | $54.20 |
| Share of COLA consumed by Part B increase | $9.80 ÷ $64.00 × 100 | 15.3% |
The Part B premium increase represented about 15% of the monthly COLA increase. In this case, the $64 COLA exceeded the $9.80 rise in the standard Part B premium, leaving a net monthly gain of $54.20. The result can vary by year based on the COLA, Medicare premium changes and any IRMAA surcharges.
Most beneficiaries who have Part B premiums deducted from Social Security are protected by the hold-harmless provision, which generally limits the dollar increase in their Part B premium to the dollar increase in their Social Security benefit. However, the protection doesn’t apply to everyone, including certain higher-income beneficiaries.
How COLAs and Medicare Premiums Can Change Monthly Benefits
As an example, let’s start with a $2,000 monthly Social Security benefit in 2023 and track how COLAs and Medicare premium increases affect it over the next five years. Actual COLAs and standard Part B increases are used from 2024 through 2026. The 2027 and 2028 rows then project how future increases could affect the benefit using a 2.5% COLA, 6% annual Part B increase and $2 monthly Part D increase. Because Part D premiums vary by plan, Part D is excluded through 2026.
The table shows the annual COLA in dollars, the corresponding Medicare premium changes and the net amount remaining each month after those increases.
| Year | Monthly Benefit | COLA | COLA Increase | Part B Increase | Part D Increase* | Net Monthly Change |
|---|---|---|---|---|---|---|
| 2024 | $2,064.00 | 3.2% | $64.00 | $9.80 | — | $54.20 |
| 2025 | $2,115.60 | 2.5% | $51.60 | $10.30 | — | $41.30 |
| 2026 | $2,174.84 | 2.8% | $59.24 | $17.90 | — | $41.34 |
| 2027* | $2,229.21 | 2.5% | $54.37 | $12.17 | $2.00 | $40.20 |
| 2028* | $2,284.94 | 2.5% | $55.73 | $12.90 | $2.00 | $40.83 |
*2027 and 2028 use hypothetical assumptions because Medicare and Social Security amounts have not been announced.
How IRMAA Can Take a Bigger Bite Out of Your COLA
Higher-income retirees may pay more than the standard Medicare premiums shown above. IRMAA adds income-based surcharges to Part B and Part D, so crossing an income threshold can increase Medicare costs even when the underlying premiums remain the same.
For example, let’s consider a single Medicare beneficiary whose income moves from just below a 2026 IRMAA threshold to the next income tier. The table below shows the factors that can change:
| Medicare Cost | Below IRMAA Threshold | Above IRMAA Threshold |
|---|---|---|
| Part B | Standard premium | Standard premium plus IRMAA |
| Part D | Plan premium | Plan premium plus IRMAA |
| Effect on Social Security | Standard Part B deduction | Higher Medicare costs can reduce net Social Security income |
Because IRMAA is based on income, a large IRA withdrawal, Roth conversion or realized capital gain could increase Medicare premiums in a later year. SSA generally determines IRMAA using tax information from two years earlier, so higher income in one year can affect your Medicare costs two years later.
What Retirees Can Do
Social Security COLAs and Medicare costs can change independently from one year to the next. When new figures are announced, compare the dollar increase in your benefit with any Medicare premium changes to see how much of the COLA may remain for other expenses.
For someone born in 1960 or later, waiting from full retirement age at 67 until age 70 can increase their retirement benefit by 24%. 4 A $2,000 monthly retirement benefit at full retirement age could increase to $2,480, or $5,760 more per year before future COLAs and Medicare deductions.
Income planning also matters because IRA withdrawals, Roth conversions and other taxable income can affect future Medicare costs. Since Social Security generally uses tax information from two years earlier for IRMAA, a large increase in income could raise Part B and Part D costs two years later.
Before taking a large taxable distribution, consider whether it could push income into a higher IRMAA tier. Reviewing projected income before a Roth conversion, IRA withdrawal or large investment sale can help identify that risk.
Bottom Line
Social Security COLAs can increase your gross benefit, but Medicare premiums and IRMAA can reduce how much of that increase you actually keep. A COLA may be large enough to cover an increase in the standard Part B premium and still leave additional income for other expenses. How much remains depends on the size of the COLA, changes in Medicare premiums and whether IRMAA applies.
Retirement Planning Tips
- A financial advisor can model your Social Security claiming dates alongside planned IRA withdrawals and Roth conversions, then identify which years could push you across an IRMAA threshold. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Mandatory distributions from a tax-deferred retirement account can complicate your post-retirement tax planning. Use SmartAsset’s RMD calculator to see how much your required minimum distributions will be.
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