As the year draws to a close, millions of Social Security beneficiaries are eagerly awaiting news about the upcoming cost of living adjustment (COLA). The COLA is designed to adjust Social Security payments in line with inflation, ensuring that beneficiaries maintain their purchasing power as the cost of living increases.
For 2025, the official COLA is expected to be announced soon, using data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
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COLA Calculation Process
The COLA increase is calculated based on inflation data for July, August, and September. The Bureau of Labor Statistics (BLS) uses this data to determine how much Social Security payments need to increase to keep up with the rising cost of goods and services. The last piece of this puzzle—the September CPI-W data—will be released on October 10th, when the official COLA for 2025 will be computed.
However, with data from July and August already available, there is a tentative projection for the 2025 COLA. Early estimates suggest a 2.5% increase in Social Security benefits for 2025. This estimate, while not yet official, provides a glimpse of what beneficiaries might expect.
Modest 2025 COLA Projection
Compared to the 3.2% COLA increase seen at the beginning of 2024, the projected 2.5% increase for 2025 may seem modest. With inflation cooling down, the lower adjustment reflects a slowing pace of rising prices.
Currently, the average retired worker receives $1,920 in monthly Social Security benefits. If the projected 2.5% increase holds true, that would translate to an extra $48 per month, raising the average payment to $1,968 in 2025. While any increase is welcome, it may not be as significant as some beneficiaries hoped. However, there’s another factor to consider: Medicare Part B premiums.
Medicare Part B’s Impact
If you’re enrolled in both Social Security and Medicare, your Medicare Part B premiums are automatically deducted from your Social Security payments. In 2024, the standard Part B premium rose by $9.80 from the previous year. As of now, Medicare has yet to announce the new premium for 2025, but it’s expected that there will be an increase. If the hike is similar to last year’s, it could offset part of the Social Security COLA increase.
For example, if the Part B premium rises by another $10, that would reduce the projected $48 monthly increase from Social Security to just $38. Although the Social Security Administration will announce the official COLA on October 10th, you may need to wait a bit longer to learn how Medicare premiums will impact your final monthly benefit.
What a 2.5% Increase
Though a 2.5% COLA increase might not sound like much, it still provides some financial relief to beneficiaries across various Social Security programs. Here’s a breakdown of what the increase could look like for different categories:
| Benefit Type | Current Payment | 2.5% COLA Increase | New Payment | Extra Income |
|---|---|---|---|---|
| Retirement | ||||
| Average | $1,920 | $48 | $1,968 | $48 |
| Age 62 | $2,710 | $68 | $2,778 | $68 |
| Age 67 | $3,822 | $96 | $3,918 | $96 |
| Age 70 | $4,873 | $122 | $4,995 | $122 |
| Survivor | ||||
| Average | $1,505 | $38 | $1,543 | $38 |
| Individual | $1,773 | $44 | $1,817 | $44 |
| 2 Children | $3,653 | $91 | $3,744 | $91 |
| Disability | ||||
| Average | $1,537 | $38 | $1,575 | $38 |
| Blind Recipients | $2,590 | $65 | $2,655 | $65 |
| Maximum Payment | $3,822 | $96 | $3,918 | $96 |
| SSI | ||||
| Average | $698 | $17 | $715 | $17 |
| Individuals | $943 | $24 | $967 | $24 |
| Couples | $1,415 | $35 | $1,450 | $35 |
| Essential Person | $472 | $12 | $484 | $12 |
What to Keep in Mind
While you may be less than thrilled with a smaller COLA in 2025, it’s important to understand the reasons behind it. The modest increase is a result of cooling inflation, which means the cost of living is rising more slowly. Additionally, even with the increase in Medicare premiums, slower inflation can help you retain more of your purchasing power. This year’s adjustment will still provide much-needed financial support for beneficiaries of retirement, survivor, disability, and SSI programs.
As we wait for official announcements from Social Security and Medicare, it’s clear that even a modest COLA can still bring relief. Stay tuned for more information after October 10th to get the full picture of what your benefits will look like in 2025.
FAQs
When will the 2025 COLA be announced?
The 2025 COLA will be announced on October 10th.
How is the Social Security COLA calculated?
It’s based on CPI-W data for July, August, and September.
What is the expected COLA increase for 2025?
The expected increase is 2.5%.
Yes, an increase in Part B premiums could reduce your net COLA gain.
How much will the average Social Security benefit rise in 2025?
The average monthly benefit may rise by $48.
