Introduction

If you’re retired—or planning to retire soon—you’ve probably seen the headlines about the 2026 Social Security COLA and the Medicare Part B premium increase. You might even be trying to figure out what your real monthly increase will look like after everything is deducted.

That’s where most retirees get frustrated. On paper, a 2.8% COLA sounds like a respectable raise. But by the time Medicare takes its share, many people are wondering:

“What is my actual 2026 Social Security net increase?”
“Why does my check feel smaller than expected?”
“Is this raise even a raise at all?”

This article breaks down the math clearly and calmly—no hype, no fear: just real numbers and a practical explanation tailored to retirees and pre-retirees, especially those living in Maryland.

Most major outlets report only the surface-level story. They don’t show you the step-by-step math, the “net increase” after Medicare’s premium hike, or the Maryland-specific tax strategies that can help you keep more of your income.

This guide will walk you through:

• How to calculate your 2026 Social Security net increase
• Why the Medicare Part B hike absorbs so much of the COLA
• Whether the hold harmless rule protects you
• The overlooked Maryland ACA premium spike impacting early retirees
• State-specific tax strategies that help offset the squeeze
• How to adjust your 2026 retirement budget with confidence

Let’s break down what’s really happening.

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The Math: Why Your 2.8% Raise Might Feel Like 1%

The 2026 COLA is officially 2.8%. But the Medicare Part B premium is increasing by $17.90, up to $202.90/month. And if you’re subject to IRMAA, your premiums are increased even more!

To understand this, you need to look at the difference between gross benefit increases and net pay after Medicare deductions.

Let’s use the average retiree benefit for 2025:

• 2025 average Social Security benefit: $1,907
• 2026 COLA: 2.8% = +$53.40/month
• Medicare Part B premium increase: –$17.90

Your Real Raise:

$53.40 COLA – $17.90 Medicare = $35.50 net increase/month

That’s a net increase of just 1.8%, not 2.8%.

Visual: Net Social Security Benefit 2026 Chart

Item	Amount
2025 Monthly Benefit	$1,907
2026 COLA (2.8%)	+$53.40
Medicare Part B Increase	–$17.90
2026 Net Increase	+$35.50
Effective Raise %	1.8%

Why does this feel so underwhelming?

Because 34% of your COLA is immediately consumed by the Medicare Part B hike.

And that’s before we factor in:

• Medicare Part D premium changes
• IRMAA adjustments
• State and federal taxes
• Inflation in essentials (utilities, food, property taxes)

The COLA was designed to help retirees keep up with inflation, but Medicare continues to grow faster than the inflation adjustment.

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The “Hold Harmless” Safety Net: Are You Protected?

The hold harmless rule prevents Medicare Part B premium increases from reducing your Social Security check below where it was the year before.

But it does not guarantee you keep your full COLA. It only prevents your check from going DOWN.

The $640 Threshold Explained

For 2026, the rule works like this:

• If your monthly Social Security benefit is around $640 or less, you’re fully protected.
• Your 2026 check cannot decrease from your 2025 amount.
• But for most retirees (who earn well above this), the rule does not prevent Medicare from absorbing part of the raise.

Common Misconceptions

• Misconception: “Hold harmless means my COLA is protected.”
  Reality: It only protects you from a reduction, not a smaller increase.
• Misconception: “New Medicare enrollees are protected.”
  Reality: New enrollees are NOT covered by hold harmless.
• Misconception: “Married couples get special treatment.”
  Reality: Premiums are assessed per person, not per household.

If your 2026 benefit is larger than ~$640/month, expect Medicare’s $17.90 hike to reduce the size of your raise.

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The Pre-Retiree “Cliff”: Maryland’s ACA Premium Spike

If you’re not on Medicare yet—typically retirees age 62–64—the picture is even tougher.

Maryland’s ACA marketplace premiums for 2026 are projected to rise about 13.4%.

For a couple in their early 60s, this could mean:

• $250–$450 more per month
• $3,000–$5,000 more per year

This hits pre-retirees hardest because:

• They have the highest ACA premiums of any age group.
• They often rely on 401(k) withdrawals before Social Security starts.
• They have fewer tax-advantaged tools to offset premium increases.

If you’re planning to retire before Medicare, this is a critical planning point.

A strategic withdrawal plan—balancing Roth conversions, taxable income, and ACA subsidy eligibility—can be the difference between affordable coverage and a runaway cost.

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Good News for Locals: Maryland Tax Breaks to Recoup the Loss

Here’s where Maryland retirees have an advantage: Maryland offers several tax breaks that many residents overlook.

These can potentially offset all—or even more—of what the Medicare premium increase takes away.

Maximizing the Maryland Pension Exclusion (2026)

Maryland allows eligible retirees to exclude up to $41,200 of pension or certain retirement income.

Eligibility includes:

• Age 65+
• Or totally disabled
• Or if you have a spouse who is totally disabled

This applies to:

• Traditional pensions
• 401(k)/403(b)/457 withdrawals

Used wisely, this exclusion alone can fully offset the Medicare Part B increase for most retirees.

Maryland Senior Tax Credit (Summary for 2026 Planning)

Maryland offers a nonrefundable Senior Tax Credit for residents age 65 or older, and it can help offset part of the Medicare premium increase and reduce overall tax liability.

For tax year 2024 (filed in 2025)—the most recent guidance available—the credit amounts are:

• $1,000 for single filers with Federal Adjusted Gross Income (FAGI) ≤ $100,000
• $1,750 for married couples filing jointly with FAGI ≤ $150,000
  • Reduced to $1,000 if only one spouse is age 65+

The credit is claimed on Maryland Form 502CR, Part M, and flows to your main state return.

“Does Maryland tax Social Security in 2026?”

Short answer: No, Maryland does not tax Social Security benefits.

This makes Maryland more retiree-friendly than people realize, especially when used in coordination with:

• Pension exclusion
• Senior deduction
• Smart withdrawal strategies

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Action Plan: Adjusting Your 2026 Retirement Budget

Here’s a simple framework to ensure you’re prepared for the 2026 changes.

1. Estimate Your Exact 2026 Net Social Security Increase

You can calculate this using:

1. Your 2025 benefit
2. Add 2.8%
3. Subtract $202.90 for Part B (if applicable)
4. Compare the difference

This gives you your true net raise.

2. Check Your IRMAA Bracket

Higher-income retirees may be hit with IRMAA increases.

Review:

• 2026 income limits
• Whether your 2024 tax return will trigger IRMAA
• Opportunities to appeal using Life-Changing Event rules

3. Review Your Medicare Part D Plan

Open enrollment is the prime time to:

• Compare premiums
• Check drug formularies
• Ensure your medications are still covered

4. Review Maryland Tax Break Eligibility

Especially:

• Pension exclusion
• Senior deduction
• Veterans’ exemptions
• Real property tax credits
• Prescription drug assistance programs

5. Revisit Your Withdrawal Strategy

A coordinated plan can:

• Reduce taxable income
• Avoid IRMAA
• Optimize ACA subsidies (for under-65 retirees)
• Extend portfolio longevity

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Conclusion

The headline story for 2026 is simple:
While the COLA is 2.8%, Medicare takes a significant bite out of the raise. For most retirees, the 2026 Social Security net increase will be closer to 1–1.8%.

But Maryland retirees aren’t powerless. State-level tax strategies—combined with smart Medicare planning and income management—can help you offset the squeeze and protect your long-term financial stability.

The key is being proactive. Once you understand the numbers, you can adjust your income, withdrawals, and tax strategy accordingly.

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Key Takeaways

• The 2026 Social Security net increase is smaller than the COLA—Medicare absorbs about one-third.
• The hold harmless rule protects only low-benefit recipients (around $640/month or less).
• Early retirees in Maryland face additional pressure from 13%+ ACA premium increases.
• Maryland offers strong tax benefits that can offset Medicare increases, including the pension exclusion and senior deduction.
• A coordinated Social Security, Medicare, and tax strategy is essential for maintaining retirement income stability.

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Call-to-Action

Retirement planning is more complex than ever—especially when premiums rise faster than benefits and taxes vary year to year. If you want clarity around your 2026 net income, Medicare costs, or Maryland-specific tax strategies, we can help.

👉 Schedule an introductory call: Get personal guidance tailored to your retirement income, tax situation, and long-term plan: