In 2025, the Social Security Administration (SSA) is going to carry out another Cost of Living Adjustment (COLA). The official announcement will probably be made on October 10, but early estimates indicate a slight rise that would affect millions of Americans. As noted by Mary Johnson, an experienced analyst for Social Security and Medicare, the projected COLA for next year is 2.6 percent. This estimate relies on information from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) published by the Department of Labor.
Projected COLA Increase for 2025
In case the prediction for a COLA of 2.6 percent is realized, then the average Social Security payment to retired workers would rise from the current $1,918.28 (as in June 2024) to about $1968.15 by January 2025. This means that retirees are likely going to receive an extra $49.87 in their January payments.
However, for the 72.4 million American beneficiaries who depend on social security benefits, this increase would be very welcome. Such payments are like lifesavers, especially for retired workers, disabled persons, and families of deceased workers.
How Is the COLA Calculated?
Data related to inflation is used as a basis for the annual COLA. Each year, the SSA measures the change in CPI-W from one year to another in the third quarter of each year. More specifically, the COLA is calculated by comparing the CPI-W from the third quarter of the current year (July, August, and September) with that of last year.
Given that the final CPI-W figures for July and August have already been published, organizations such as the Senior Citizens League can predict with reasonable accuracy what these would be in September. The only remaining factor is September’s inflation data, which must firmly establish a percentage increase.
Impact of Medicare Part B Premium Hikes
While a COLA increase is generally a good thing, retirees and other beneficiaries of Social Security must be mindful of the rising costs of Medicare premiums. The majority of the beneficiaries have their Medicare Part B premiums deducted straight from their social security checks. According to this year’s report by the Medicare trustees, there is an anticipation that Part B premiums will increase in 2025. An estimated additional amount of around $10.30 per month is likely to be experienced, which means that in 2025 the standard Part B premium will rise from $174.70 (in 2024) to $185.
The rise in Medicare premiums may limit the impact of the COLA increase, thus making it less profitable for retirees. For instance, should a retiree have a COLA increase of $49.87, he/she would only benefit positively by an adjusted amount of just $39.57 due to an extra payment before this can apply to other deductions such as outpatient hospital services or doctor’s visits, etc. Nevertheless, taking into account the costs incurred while receiving medical facilities through Medicare programs, it still gets better, albeit at slower rates than one would expect when they factored in these other costs at all times during the process of retirement financing exercises.
When Will Beneficiaries See the Increase?
In January 2025, the upcoming Social Security COLA will be effective, and in that month itself, it will be reflected in monthly checks received by beneficiaries. The official notification on the percentage of COLA is anticipated on October 10th, 2024, but it’s still a long way to go from now. Additionally, SSA will also announce official information regarding next year’s Medicare Part B premiums by November, which allows retirees to plan their finances accordingly.
COLA: A Lifeline for Millions
Many retirees and people who receive disability payments depend on Social Security benefits for their daily expenses, such as housing, utility bills, or buying groceries. Even slight increases in these payments have an impact on the rising costs of living. However, with an upsurge in health care expenses too, it becomes essential for beneficiaries to factor into their annual budgets both the COLA increase and the adjustments made on Medicare premiums.
On one hand, it is easy to dismiss 2.6 percent from life insurance as nothing new, but on the other hand, inflation has remained one of America’s major concerns regarding household budgetary allocation. Due to this hike in Medicare premiums, though there will be more funds disbursed by the Social Security fund, healthcare expenditure always offsets COLA adjustments, resulting in flat rates.
Millions of Americans would be able to plan for their lives depending on official announcements about COLA and Medicare premium outlines after a few months.
How much will my Social Security benefits increase in 2025?
Here’s how a Social Security COLA breaks down for different recipients.
COLA increases for 2025
| Beneficiary type | Average 2024 check (as of June) | Average estimated monthly increase in 2025 | Average estimated 2025 check amounts |
| Source: Social Security Monthly Statistical Snapshot, June 2024 | |||
| Retiree | $1,918.28 | $49.87 | $1,968.15 |
| Retired couple, both receiving benefits | $3,836.56 | $99.75 | $3,936.31 |
| Worker with disability | $1,537.70 | $39.98 | $1,577.68 |
| Widow(er) | $1,784.09 | $46.39 | $1,830.48 |
| Children of deceased workers | $1,105.32 | $28.73 | $1,134.05 |
The Cost of Living Adjustment (COLA) for next year is expected to be much less than the 8.7% increase seen in 2023, which was the highest in over 40 years. This substantial support was a reaction to sudden inflationary trends between 2021 and 2022. In 2025, the expected increase is about 2.6%, which corresponds with an average COLA for the last twenty years, according to the Senior Citizens League.
