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Retirees on Social Security just got some good news from Uncle Sam

If you watch the news on TV, you might think you’re seeing nothing but bad news. Network news organizations focus on negative stories because they drive ratings.

However, there is actually a lot of good news if you look for it. As a case in point, retirees on Social Security just got some good news from Uncle Sam.

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Before I go any further, the good news mentioned above does not come from the Social Security Administration (SSA). However, it does have implications for Social Security beneficiaries.

The good news I’m referring to was announced in early January by the US Bureau of Labor Statistics (BLS). Each month, the BLS releases inflation data for the previous month. And the December numbers should be encouraging for retirees.

According to the BLS, the Consumer Price Index (CPI) for December 2025 was 2.7%. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), the inflation metric that SSA uses to calculate the annual Social Security cost-of-living adjustment (COLA), was 2.6%.

Why are these numbers good news for retirees? The Social Security COLA for 2026 is 2.8%. At least through the end of 2025, the price of goods and services increased at a lower rate than Social Security benefits.

This year’s Social Security COLA was significantly lower than the average historical increase of 3.7%. However, as long as retirees’ benefits are at least as high as prices, the purchasing power of their Social Security checks will not deteriorate.

With all of this in mind, the December inflation report from the BLS was good news for retirees on Social Security. Unfortunately, though, it wasn’t good news.

For one thing, the SSA calculated the benefit increase retirees would receive in 2026 based on inflation data (using the CPI-W metric) for the third quarter of 2025. COLAs are always after the fact. In other words, if you’re retired, you’ve already paid the higher prices that were intended to offset this year’s COLA. Inflation in December 2025 is slightly lower than the June 2026 COLA does not actually make the benefit increase more attractive.

Another factor dampens the impact of the December inflation data. The actual inflation retirees experience is often greater than the CPI or CPI-W numbers reflect. One main reason is that rapidly rising health care costs account for a large portion of retirees’ overall spending.

As a case in point, look at Medicare Part B increases for this year. Standard Medicare Part B premiums rose 9.7% over the year, from $185 to $202.90. This $17.90 increase negates a significant portion of the average $56 monthly benefit increase for retired workers from the 2026 Social Security COLA.

Additionally, the annual deductible for Medicare Part B beneficiaries increased 10.1% year over year, from $257 in 2025 to $283 in 2026. Any retiree who meets their Part B deductible will pay another $26 this year. Higher Medicare Part B costs alone can offset nearly 78% of the 2.8% COLA for the average retiree.

It is likely that the relatively moderate inflation levels reported for December 2025 will continue into 2026. Inflation may also decrease.

However, there is considerable uncertainty. Some experts predict that the impact of President Trump’s tariffs will be greater this year than last year. The president has also threatened stiff tariffs on imports from Canada and a 25% tariff on South Korean imports. Much of the higher costs associated with these higher tariffs, if implemented, would likely be borne by U.S. consumers.

Ultimately, retirees will have to wait until next year to determine whether the 2.8% Social Security COLA was enough to cover the higher prices they incurred. Maybe they’ll have good news, but maybe not.

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Social Security retirees just got some good news from Uncle Sam was originally published by The Motley Fool.

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