Social Security’s annual cost-of-living adjustment, or COLA, boosts monthly benefits. But for most Medicare Part B enrollees, premiums are withheld from that same payment, which means a higher premium can reduce the extra money the COLA is meant to provide. Understanding premium deductions, hold-harmless protections and income-based surcharges can help you estimate your real increase. The examples below show how the effect varies by benefit amount.
How Part B Premiums Reduce the COLA Boost
Social Security determines the COLA by comparing the third-quarter average of the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, with the third quarter of the most recent year in which a COLA took effect. The Social Security Administration typically announces the adjustment in October, and higher payments begin in January.
The Centers for Medicare & Medicaid Services separately announces the next year’s standard Part B premium, usually in the fall. Because most beneficiaries have that premium deducted automatically from their Social Security payment, the deposit reflects both changes.
Social Security has announced a 3.6% COLA for 2027, but CMS has not yet released a final 2027 Part B premium. For that reason, the examples here use 2026, the latest year for which both figures are confirmed.1
Two formulas can help isolate the Part B effect:
Multiply the second result by 100 to convert it to a percentage. These calculations assume no other deductions change and that hold-harmless protection does not apply.
Examples Across Benefit Levels
For 2026, a 2.8% COLA increased benefits while the standard monthly Part B premium rose by $17.90.2 The sample figures below use monthly benefits before the COLA and before Medicare deductions; actual payments can vary slightly because of SSA rounding.
Monthly benefit | Gross raise calculation | Premium increase | Net monthly raise | Share of raise lost |
|---|---|---|---|---|
$1,200 | $1,200 × 2.8% = $33.60 | $17.90 | $33.60 − $17.90 = $15.70 | $17.90 ÷ $33.60 = 53.3% |
$2,000 | $2,000 × 2.8% = $56.00 | $17.90 | $56.00 − $17.90 = $38.10 | $17.90 ÷ $56.00 = 32.0% |
$3,000 | $3,000 × 2.8% = $84.00 | $17.90 | $84.00 − $17.90 = $66.10 | $17.90 ÷ $84.00 = 21.3% |
Because the standard premium increase is a fixed dollar amount, it takes a larger share of smaller COLA gains. A beneficiary receiving $1,200 loses more than half of the increase to Part B, while someone receiving $3,000 gives up about one-fifth.
The income level at which exactly half of the raise goes to the premium increase is $17.90 ÷ (2.8% × 50%), or about $1,278.57 per month. Below that point, the premium increase consumes more than half of the gross raise, before any protection is applied.
How the Hold-Harmless Rule Protects Some Beneficiaries
The hold-harmless rule generally prevents a Part B premium increase from reducing an eligible beneficiary’s net Social Security payment below the previous level. Instead, the premium is limited to what the benefit increase can cover.
To qualify, a person generally must be entitled to Social Security in the relevant months and have the premium deducted from the corresponding benefit payments. People who pay income-related surcharges and those whose premiums are paid by Medicaid are excluded.3
Beneficiary group | Hold-harmless applies? | Reason |
|---|---|---|
Continuing beneficiary meeting deduction requirements | Generally yes | Meets benefit and premium-withholding conditions |
New Part B enrollee without qualifying prior deductions | Generally no | Lacks the required deduction history |
Beneficiary paying IRMAA | No | Income-related premiums are excluded |
Beneficiary whose premium Medicaid pays | No | State pays the premium |
Person paying Medicare directly without Social Security withholding | Generally no | Does not meet withholding requirements |
That protection can preserve the payment without creating extra spending money. For instance, if a hypothetical COLA adds $14 but Part B rises $17.90, an eligible beneficiary may see the entire increase absorbed, leaving the net payment unchanged. Other deductions can still affect the deposit.
How IRMAA Can Absorb More Than the COLA
Higher-income beneficiaries pay an income-related monthly adjustment amount, or IRMAA, for Part B and Part D. Social Security generally uses modified adjusted gross income, meaning adjusted gross income plus tax-exempt interest, from two years earlier. That means 2026 premiums generally reflect 2024 income. Hold-harmless protection does not apply.
2026 income tier: single filer MAGI | Married filing jointly MAGI | Total monthly Part B premium per person |
|---|---|---|
$109,000 or less | $218,000 or less | $202.90 |
Above $109,000 through $137,000 | Above $218,000 through $274,000 | $284.10 |
Above $137,000 through $171,000 | Above $274,000 through $342,000 | $405.80 |
Above $171,000 through $205,000 | Above $342,000 through $410,000 | $527.50 |
Above $205,000 but below $500,000 | Above $410,000 but below $750,000 | $649.20 |
$500,000 or more | $750,000 or more | $689.90 |
These CMS figures apply to full Part B benefits; separate rules apply to married people filing separately.4
Moving into the first surcharge tier adds $81.20 per month ($284.10 minus $202.90), which is more than the $56 COLA on a $2,000 benefit. Someone shifting from the 2025 standard premium to that 2026 tier would see a $99.10 increase ($284.10 minus $185), leaving the payment $43.10 lower even after the COLA. Part D IRMAA could reduce it even further.
How to Estimate Your Net Raise
Check your gross benefit and Medicare deductions on your COLA notice, which is mailed in December unless you receive electronic notices, or review your My Social Security account. Then use the formula with your actual premium change, especially if you pay IRMAA.
Also consider whether taxable Roth conversions, large IRA withdrawals or realized capital gains could affect future IRMAA. Spreading income across multiple years may help manage the thresholds, but weigh any premium savings against broader tax and investment effects.
If retirement, the death of a spouse or another qualifying life event significantly lowers income, request a new determination using Form SSA-44 and supporting documents. A lower current income does not automatically replace a prior-year return used for the calculation.
Finally, review Medicare Advantage and Part D changes during open enrollment. Premium changes can affect your deposit when they are withheld, or your household budget when they are billed separately, so calculate the full cost of coverage before spending the apparent raise.
Bottom Line
A Social Security COLA raises your gross benefit, but higher Medicare premiums can leave you with a much smaller gain in spendable income. Hold-harmless protection shields some beneficiaries from Part B premium increases, while higher earners face additional costs through IRMAA. Reviewing your benefit notice, Medicare premiums and income with a financial advisor can help you budget for the amount you will actually receive.
Tips for Navigating Social Security
A financial advisor can help with Social Security and retirement income planning. Finding one does not have to be difficult. SmartAsset’s free tool matches you with vetted financial advisors in your area, and you can interview your matches at no cost to decide which one is right for you. If you are ready to find an advisor who can help you reach your financial goals, get started now.
COLAs are designed to account for inflation, which can be a tricky concept to understand. But inflation is unavoidable, so it helps to know how it may affect your money. You can use SmartAsset’s inflation calculator to track what your money may be worth in the future.
Photo credit: ©iStock.com/witsarut sakorn, ©iStock.com/designer491
“Latest Cost-of-Living Adjustment.” Latest Cost-of-Living Adjustment, Social Security Administration, Oct. 11, 2018, www.ssa.gov/oact/cola/latestCOLA.html.︎
“2026 Medicare Parts A & B Premiums and Deductibles.” CMS, Oct. 21, 2026, https://www.cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles. ︎
“Amending the Indirect Hold Harmless Threshold of Health Care-Related Taxes Proposed Rule (CMS-2452-P).” CMS, Sept. 25, 2026, https://www.cms.gov/newsroom/fact-sheets/amending-indirect-hold-harmless-threshold-health-care-related-taxes-proposed-rule-cms-2452-p. ︎
https://www.medicare.gov/publications/11579-medicare-costs.pdf. Accessed Oct. 21, 2026. ︎
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