It’s a big piece of information we’re still missing.
Millions of retired Americans collect a monthly Social Security benefit. And without a yearly cost-of-living adjustment (COLA), many seniors would no doubt fall behind financially from one year to the next.
The purpose of COLAs is to make sure seniors are able to maintain their buying power as inflation drives the cost of living up. And so during this time of the year, Social Security recipients tend to find themselves growing increasingly curious about their upcoming COLA for the new year.
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Social Security COLAs are calculated based on third quarter readings from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). We already have CPI-W data for July and August, but September’s reading won’t be available until October 10. And it’s on that date when the Social Security Administration intends to announce a number of key changes to the program — COLA-related and otherwise.
But September’s CPI-W reading isn’t the only missing piece of the puzzle when it comes to determining what 2025’s COLA will mean for you. There’s another big piece of information you’ll need to see what sort of financial impact your upcoming raise will have.
Don’t forget to account for a rise in Medicare costs
Seniors who are enrolled in both Social Security and Medicare have their monthly Part B premiums deducted from their benefits automatically. If that’s your situation, and if the cost of Medicare Part B goes up substantially in 2025, it could eat into your upcoming COLA, leaving you with less money to work with.
In 2024, the standard monthly Medicare Part B premium increased from $164.90 to $174.70. Just as we don’t have a CPI-W reading for September at this point in time, so too are we missing an update from Medicare on Part B costs.
But we may get inflation data for September before Medicare releases a standard Part B premium for the new year. What this means is that on October 10, you might find out what percentage your Social Security check will increase by. But you won’t necessarily know how much extra money you’ll get in each monthly check until you find out more about Medicare.
Ways to cope with a smaller increase
Recent estimates are calling for a 2.5% Social Security COLA in 2025. But that number could shift if inflation picks up or slows down before September comes to an end.
Still, given where we are in the year, that 2.5% estimate is unlikely to be so far off. And while we don’t know what Medicare has in store, it’s fair to assume that a modest increase in Part B is coming.
If that leaves you with a net raise you’re not happy with, one thing you can do is try to rethink some of your current expenses. You may have a sentimental attachment to the home you raised your children in. But if it’s expensive to heat and maintain, and your property tax bill keeps going up, downsizing could be a better bet.
It also wouldn’t hurt to dabble in the gig economy and see if there’s a way you can boost your income by taking on flexible work. You may find that putting in a few hours a week makes a world of a difference for your finances.