Every January, Social Security recipients get a cost-of-living adjustment. Every year, Medicare Part B premiums also increase — and both changes hit the same check. In 2026, the COLA was 2.8%, adding an average of $56 per month to retiree benefits. Medicare Part B premiums rose $17.90 per month to $202.90.
The math: $56 raise, $17.90 taken back. The net increase for the average retiree was roughly $38 per month. That is the real raise. And according to the Center for Retirement Research at Boston College, Medicare Part B premiums as a share of the average Social Security benefit hit an all-time high of 9.4% in 2026 — up from 8.3% in 2018.
Most retirement plans do not model this. They project Social Security income as a line item and inflation as a separate line item. The Medicare premium is a third variable reducing the first one — year after year, regardless of how markets perform.
The Shrinking COLA
The Social Security COLA is calculated from the Consumer Price Index for Urban Wage Earners (CPI-W). It is designed to preserve purchasing power against general inflation. What it does not account for is Medicare premium growth, which has consistently outpaced general inflation over time.
In 2026, the Part B premium exceeded $200 for the first time. The annual Part B deductible rose to $283, up $26 from 2025. Part A hospital deductibles increased to $1,736. For higher-income retirees subject to IRMAA surcharges, the monthly Medicare bill ranges from $284 to $689 — and the 2026 IRMAA brackets themselves rose about 9%.
The result is that a retiree who built their plan around a 2.8% income raise received something closer to a 1.9% raise in purchasing power — before accounting for the 3.3% CPI increase that eroded the rest. In real terms, the average retiree's Social Security income bought less in January 2026 than it did in January 2025.
What This Does to the Retirement Model
The standard approach to retirement planning treats Social Security as a fixed or slowly growing income floor. The Retirement Calculator lets you test what that floor actually looks like when Medicare premium growth is factored in.
Try this scenario: a 65-year-old retiring today with $2,100/month in Social Security income, $400,000 in savings, and a $4,500/month spending target. Run the calculator with $2,100 in Social Security income — the headline figure. Then rerun it with $1,897 — the net after Medicare Part B. The gap between those two retirement trajectories is not trivial, particularly over a 25-year retirement horizon.
In the Retirement Calculator, enter your projected Social Security benefit, then subtract $202.90 for Part B before inputting it. That is your actual income floor — what lands in your account each month. Most people run the calculation with the gross figure and build a plan that is $17.90 to $689 per month too optimistic.
Your Social Security statement shows $2,100/month. Your bank account gets $1,897. The Retirement Calculator scenario above — gross vs. net, same savings, same spending target — shows how much that $203 gap costs over a 25-year retirement. Run it with your actual numbers.
Model Gross vs Net SS IncomeThe Inflation Double Squeeze
Two separate cost increases. One fixed income absorbing both.
Medicare premium inflation and general consumer inflation are separate pressures hitting the same fixed income simultaneously. In 2026, Part B premiums rose 9.7%. CPI ran at 3.3% annually. A retiree on a fixed income faced both — and the COLA covered neither fully.
The Inflation Calculator illustrates the compounding effect. Enter a fixed retirement income of $2,500 per month and run it forward 15 years at 3.3% annual inflation. The nominal dollars stay flat. The purchasing power falls significantly. Add 5% annual Medicare premium growth as a separate drag and the picture gets worse.
This is not a worst-case scenario. It is roughly the environment that existed in 2026 — after five years of above-target inflation and three consecutive years of Medicare Part B increases outpacing the COLA by a wide margin.
Use the Net Number, Not the Gross
The adjustment is not complicated. It requires using honest inputs. Run the Retirement Calculator with the net Social Security figure — gross benefit minus the applicable Medicare premium. Account for the IRMAA surcharge if your income puts you in a higher bracket. Use a conservative withdrawal rate that does not assume the COLA fully offsets healthcare cost growth.
If the plan still works with those inputs, it is a real plan. If it does not, you have time to close the gap — higher contributions, a later start date, or a lower withdrawal target. The one move that does not work is planning around numbers that assume Medicare costs stay flat or grow at the general inflation rate. They have not done that in any year on record.
Medicare ate 32% of the 2026 Social Security COLA before the money reached a single account. Build your retirement plan around what actually arrives — not what the headline number says.
Model Gross vs Net SS Income See what fixed income buys in 15 years →Sources
- Centers for Medicare & Medicaid Services. "2026 Medicare Parts A & B Premiums and Deductibles." 2025. cms.gov
- Center for Retirement Research at Boston College. "Higher Medicare Premiums Will Eat Up More than 25% of Social Security's COLA." January 27, 2026. crr.bc.edu
- Kiplinger. "Medicare Premiums 2026: IRMAA Brackets and Surcharges for Parts B and D." May 2026. kiplinger.com
- Medicare Resources. "How are Medicare costs and benefits changing for 2026?" February 2026. medicareresources.org