A 2025 Social Security COLA Estimate Is Here, But It May Be Useless Without This Number

You can get a sense of what next year’s raise looks like, but it’s not the whole story.

Millions of older Americans today collect a monthly paycheck from Social Security. And it’s that money that helps many retirees cover essential bills from food to housing to transportation.

In fact, some seniors are so reliant on Social Security that each year, they eagerly await news of a cost-of-living adjustment, or COLA. In 2024, for example, Social Security benefits rose 3.2%, which brought the average monthly retirement benefit up from $1,848 to $1,907 at the start of the year.

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Now it’s too soon to know what 2025’s Social Security COLA is going to look like. That’s because COLAs are calculated based on third quarter inflation data. And since we’re still in the first half of 2024, clearly, that information isn’t available yet.

Still, there are estimates out there from reputable groups in the context of next year’s COLA. Recently, the nonpartisan Senior Citizens League projected a 2.6% Social Security COLA for 2025. That number could, of course, change as inflation data comes in.

But even once we have inflation readings for the third quarter of 2024, there’s still another piece of the puzzle needed for seniors on Social Security to know what raise they’re really getting in 2025. And until that information becomes available, seniors won’t have a complete handle on their financial situation.

What does Medicare have in store for seniors in 2025?

Some seniors may find it helpful to see a 2.6% COLA estimate for 2025. Others may not be putting much faith in that estimate since it’s still relatively early on in the year.

But either way, the only way to know for sure how much Social Security income to expect in 2025 is to know what the cost of Medicare Part B will entail. Even an official COLA announcement, which is expected to arrive in October, won’t be complete until Medicare announces what its standard Part B premium will look like in the coming year.

In 2024, the cost of Medicare Part B rose from $164.90 to $174.70 so that the typical senior is paying $9.80 more per month than in 2023. But here’s why that’s significant.

Many seniors who collect Social Security are also enrolled in Medicare. And people in that boat have their Part B premiums deducted automatically from their monthly Social Security payments.

This year, seniors are losing a portion of their 3.2% COLA by paying $9.80 more per month for Medicare. Regardless of what next year’s COLA amounts to, the amount of extra money Social Security beneficiaries receive on a monthly basis will hinge on the extent to which Medicare goes up.

A wild card situation

To be fair, the cost of Medicare isn’t guaranteed to rise from one year to the next. But that often ends up being the case. So while seniors who aren’t enrolled in Medicare may not have to think about Part B premium costs, millions are looking at some potential impact to their 2025 COLA once that information becomes available.

As such, while it’s perfectly OK to keep tabs on Social Security COLA estimates for 2025, there’s little sense in getting hung up on any particular number unless it’s the official one announced in October. And even then, that number won’t really mean all that much in the absence of knowing what Medicare Part B is going to cost.

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