2026 Medicare Part B Premium Increase: How Retirees Should Stress-Test the COLA Squeeze

The 2026 Social Security COLA helps, but the standard Medicare Part B premium takes a noticeable bite. CMS set the standard Part B premium at $202.90 per month for 2026, up $17.90 from 2025, while Social Security benefits rose 2.8%. Retirees should look past the headline COLA and model the net monthly cash flow.

The Numbers Retirees Need for 2026

CMS announced that the standard Medicare Part B monthly premium is $202.90 in 2026, compared with $185.00 in 2025. The annual Part B deductible is $283, up from $257. Social Security announced a 2.8% COLA for benefits payable in January 2026.

Those facts are easy to read separately. The planning issue is that most Medicare beneficiaries have Part B premiums deducted from Social Security payments. So the retiree does not experience the full COLA as spendable income. The premium increase is not the only cost, but it is the first one that hits the monthly deposit.

This is why the better question is not “What is my COLA?” It is “What is my net benefit after Medicare premiums, tax withholding, drug plan premiums, supplemental premiums, and higher living costs?”

What the COLA Squeeze Looks Like

Consider three simplified Social Security benefit levels before Medicare deductions:

• $1,500 per month benefit: a 2.8% COLA adds about $42 per month. The Part B increase absorbs $17.90, leaving about $24.10 before other deductions.
• $2,000 per month benefit: a 2.8% COLA adds about $56 per month. After the Part B increase, the net improvement is about $38.10 before other deductions.
• $3,000 per month benefit: a 2.8% COLA adds about $84 per month. After the Part B increase, the net improvement is about $66.10 before other deductions.

That still helps. But it is not enough to assume the COLA covers all healthcare inflation. A Part D premium change, a Medigap increase, a new prescription, dental work, or higher property insurance can consume the remainder quickly.

Do Not Ignore IRMAA

The standard premium is only the base case. Higher-income beneficiaries may pay IRMAA surcharges for Part B and Part D. CMS lists the first 2026 Part B IRMAA threshold at modified adjusted gross income above $109,000 for individual filers and $218,000 for joint filers. The surcharge is based on income from a prior tax year, so today's income decisions can affect future Medicare bills.

That matters when retirees take large IRA withdrawals, sell appreciated assets, do Roth conversions, or receive one-time income. A move that looks affordable on a tax return can create a higher Medicare bill two years later. Bullseye's Medicare IRMAA guide explains the mechanics and why cliffs can be expensive.

The key is not to avoid every income increase. Sometimes a Roth conversion or asset sale is still worth it. The key is to model the tax cost and the Medicare premium effect together.

A Practical Household Example

Assume Robert and Elena are both 70. Their combined Social Security before Medicare deductions is $4,600 per month. A 2.8% COLA adds about $129 per month. Because both pay Part B, the standard premium increase absorbs $35.80 per month. Their net improvement before tax withholding and other coverage is about $93 per month.

Now add their real expenses. Their Medigap premiums rise $28 per month combined, their Part D plans rise $10, and one medication moves to a less favorable tier, adding $22. The apparent $129 COLA has become roughly $33 of extra spendable monthly cash before groceries, utilities, insurance, and taxes.

If Robert also takes a $45,000 IRA withdrawal to replace a car, their federal tax bill may rise and their future Medicare premiums could be affected if income crosses an IRMAA line. That does not mean the car purchase is wrong. It means it belongs in a two-year cash-flow and tax plan.

How to Stress-Test the 2026 Healthcare Budget

Start with net Social Security

Use your actual gross benefit, apply the COLA, then subtract Part B, Part D, Medigap or Medicare Advantage premiums, and tax withholding. This gives you the monthly number that can actually be spent.

Separate routine healthcare from shocks

Routine costs include premiums, predictable prescriptions, dental, vision, hearing, copays, and annual deductibles. Shock costs include a surgery, diagnosis, home health episode, or family care event. Bullseye's 2026 retiree healthcare cost estimate article explains why these categories should not be buried in one generic expense line.

Use a healthcare inflation assumption

A flat 3% general inflation assumption may be too low for healthcare. Try one scenario where healthcare costs rise 5% annually and another where premiums jump in a few uneven steps. Retirees rarely experience healthcare inflation as a smooth line.

Test income decisions two years forward

If you are considering a Roth conversion, capital gain, or extra IRA withdrawal in 2026, estimate whether it could affect Medicare premiums later. The Part B premium you pay in a future year may reflect income from two years earlier.

Keep a small monthly cushion

For retirees living close to the edge, the COLA squeeze argues for a specific monthly cushion rather than a vague emergency fund. If the net COLA after Medicare is only $25 to $60 per month, do not immediately assign all of it to discretionary spending. Consider leaving the first $30 to $50 of monthly improvement unspent until you see actual Part D, Medigap, tax withholding, and prescription costs.

That cushion is not pessimism. It is a way to avoid using IRA withdrawals for every small healthcare surprise. If costs settle lower than expected, the money can be redirected later. If costs rise, the cushion reduces the chance that a minor premium change forces a taxable withdrawal with broader tax and Medicare consequences.

Using Bullseye

Bullseye can project retirement income and expenses year by year through age 95, model Medicare costs and IRMAA surcharges, calculate Social Security benefits with COLA assumptions, estimate federal and state taxes, and compare scenarios. It does not automatically choose your Medicare plan or determine every employer-coverage or benefits rule; use manually entered assumptions and confirm rules with Medicare, SSA, a tax professional, or a qualified benefits advisor when needed.

A practical workflow is to create three versions of 2026-2028: baseline premiums, higher Medicare inflation, and a one-time income spike. Compare after-tax income, Social Security net deposits, IRMAA exposure, and withdrawal needs. The year-by-year projection approach is especially useful because Medicare premiums, taxes, and RMDs do not move in a straight line.

You can also run a broader will I run out of money in retirement scenario to see whether higher healthcare costs create a temporary cash-flow inconvenience or a structural problem.