Americans are champing at the bit for any adjustments to come to Social Security as the announcement for 2025 COLA is tomorrow, with inflation always on the rise. That may be a 2.5% COLA from the SSA for 2025, which would affect millions of beneficiaries. We’ll walk you through how to estimate your benefits with the increase in COLA and what it means.
Understanding COLA and its importance
The purpose of the Cost-of-Living Adjustment is to keep benefits current with inflation. The SSA takes the Consumer Price Index for Urban Wage Earners and Clerical Workers, representing the price level of items like groceries, rent, and transportation. This COLA is important in maintaining the buying power of beneficiaries, especially seniors and those with disabilities who depend on such payments the most.
For 2025, the projected 2.5% increase would mean an increase in benefits of approximately $48 on an average current monthly benefit of about $1,920 to approximately $1,968, beginning with the December 2024 payment and reflecting on the January 1, 2025 pay date. A key adjustment for the many living with increasing costs today.
How to project your benefits
Projecting your Social Security benefits with the expected COLA rise will follow these steps:
- Identify your existing benefit amount: Check your most recent Social Security statement or online account for the amount of your current monthly benefit.
- Calculate the COLA increase: Now, multiply your current benefit times the expected COLA percentage. (Assume 2.5%.)
- Adjust for other factors: Keep in mind that while your benefit will increase, other factors such as increasing Medicare premiums may affect your net. For instance, if the Medicare Part B premiums increase from $174.70 to an estimated $185 in 2025, then this will lower the net amount one gets.
What to expect from 2025 COLA increase
Compared to previous years, such as the record 8.7% adjustment in 2023, a 2.5% increase may seem modest. It is, however, closer to historical norms. The average COLA over the past two decades has been about 2.6%, so this adjustment could be considered relatively standard.
However, many analysts think it will not keep pace with the ongoing inflation of essential products. Shannon Benton, an analyst at The Senior Citizens League, says that for many seniors, Social Security provides more than half of their income during a month as firmly illustrated in this article, How much will Social Security increase in 2025? Here is the experts’ negative prediction on the COLA increase on October 10
Checking your eligibility
For you to be qualified for Social Security benefits and subsequent COLA rises, you must have:
- Age: You must have attained the age of 62 years to begin receiving your retirement benefits.
- Work credits: You should possess a set amount of work credits earned when you pay Social Security taxes during your working years.
- Residency: You must be residing in the United States.
Using online calculators
There are several online calculators that you can avail of to give you a more realistic estimate of your Social Security benefits:
- Social Security Administration website: The SSA has calculators that give estimates based on your earnings history.
- Third-party calculators: Websites, such as Bankrate and AARP, also offer simple calculators that take into consideration variables such as expected COLA increases.
