What is the 2025 COLA Increase?
As a retiree using Social Security, you are likely waiting for the information on how much increase will be approved on your monthly pension next year. The Social Security Administration (SSA) annually adjusts benefits by a cost-of-living adjustment (COLA) to cover inflationary trends. For the year 2025, the anticipated increase in COLA is said to be approximately 2.5%. It is a smaller figure than the 2024’s increase which stands at 3.2%, however, it will still alleviate the cost increase experienced in food, shelter and healthcare among others.
When Will You Get Your First COLA-Adjusted Payment?
The first date you’ll see the increase reflected in your Social Security check will depend on your birthday. Most beneficiaries will receive their first extended payment in January 2025. The SSA staggers payments based on the day of the month you were born. For instance, if your birthday falls between the 1st and the 10th of the month, you’ll get your COLA-adjusted payment on the second Wednesday of January. If your birthday is later in the month, expect your payment a bit later in January.
SSI recipients, however, get their payments a bit earlier. The first COLA-adjusted SSI payment for 2025 will be issued on December 31, 2024, since January 1 falls on a federal holiday. This allows you to start off the new year with your newly adjusted benefits.
How Much Will Your Check Increase?
The overall COLA adjustment that you will receive relative to your age will be based on your existing Net Social Security payment. To get a rough estimate, you can take your benefit and assume a 2.5% increase. For instance, assuming you are getting $2,000 per month at the present, a 2.5% increased monthly subsidy will add $50 to the monthly check effective from January thus making the amount $2050.
This augment is intended to ensure you maintain your standards of living relative to inflation, however it is inevitable that overall benefit increase changes may also apply due to various reasons such as the rise of medicare premiums. Should there be an increase in Medicare premiums, this could offset your COLA, so make sure you factor that in when making assumptions on your budget for the next year.
How Can You Confirm Your New Benefit Amount?
Wondering how you’ll know exactly how much your new Social Security payment will be? The SSA will send out personalized notices to all beneficiaries by December 2024. If you’re signed up for a “my Social Security” account, you’ll be able to access this information online via the Message Center. Signing up for an account not only gives you early access to this important information, but also allows you to manage your benefits more easily throughout the year.
How Does COLA Impact Your Long-Term Benefits?
Due to the ever-increasing costs of living, it has become essential to adjust Social Security benefits to prevent any decrease in their purchasing power, and hence, the need to make COLA adjustments. It is necessary to note however that, while it is apparent that there is no direct effect of COLA on Social Security benefit payments, it affects the Primary Insurance Amount (PIA). Your PIA, or Primary Insurance Amount, is the benefit awarded to you at full retirement age that is critical in deciding your monthly benefit payments.
As you begin to take advantage of the benefits before your Full Retirement Age (FRA), the amount in benefits will be lower, even with the increase in cost of living adjustments (COLA) benefits. On the contrary, when a member seeks to extend the benefits beyond the Full Retirement Age, that member can receive a higher monthly benefit as a result of the delayed retirement credits awarded. Knowing how the incidence of cost of living adjustment interacts with the primary insurance amount is very crucial in ensuring the maximization of Social Security benefits.
To summarize, it can be said that the 2025 COLA increase will provide a small enhancement for your Social Security benefits, with the adjusted payments starting from January 2025 for a majority of the retirees. However, do remember to watch out for the official statement in the month of October and most importantly create a ‘my Social Security’ account for benefits pertaining to you.
