The average monthly benefit amount will increase by about $56. The maximum amount of earnings subject to the Social Security tax will rise to $184,500.
For seniors, much of the increase will go toward health care costs. The health spending burden for people enrolled in Medicare is twice as large as that of other households, and it accounted for 13.6 percent of total spending in 2022, according to KFF, a health care research nonprofit.
The dollar amount of the COLA varies according to one’s benefit level. That means the net increase in benefits will depend on how much Medicare’s Part B premium goes up, which is deducted from the Social Security benefits of most retirees and covers doctor visits and other outpatient care.
The premium for 2026 has not yet been announced, but the latest annual report on Medicare’s finances from the program’s trustees projected that it would rise 11.6 percent, or $21.54, next year to $206.50 per month. If that forecast holds, the Part B increase alone will consume nearly half of the COLA awarded to the average beneficiary. For those who receive less Social Security, the Part B increase could significantly reduce any boost they would receive from the adjustment.
The small inflation adjustment comes at a time when a majority of seniors are financially fragile. A recent study by the National Council on Aging, an advocacy group, found that 80 percent of Americans ages 60 and over would not have sufficient resources to handle a financial shock such as a divorce, a serious health problem or the need to pay for long-term care. The study also found a strong link between wealth and life span: The poorest Americans die, on average, nine years earlier than the wealthiest Americans.
“The bottom line is that it’s getting harder and harder to age in America,” said Ramsey Alwin, the president and chief executive of the National Council on Aging.
Living costs and inflation rates vary considerably around the country, and that means a Social Security benefit goes farther in some regions than in others.