Social Security’s 2025 COLA: The Big Wild Factor Everyone Should Know About

Millions of retired Americans collect a monthly Social Security benefit. And without an annual cost of living adjustment (COLA), many seniors would undoubtedly fall behind financially from year to year.

The purpose of COLA is to ensure that seniors can maintain their purchasing power as inflation increases the cost of living. And so, around this time of year, Social Security recipients tend to become increasingly curious about their COLA future for the new year.

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Social Security COLAs are calculated based on third-quarter readings of the Consumer Price Index for Urban Wage and Service Workers (CPI-W). We already have CPI-W data for July and August, but the September reading won’t be available until October 10th. And that’s when the Social Security Administration plans 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 the 2025 COLA will mean for you. There’s another important piece of information you’ll need to see what kind of financial impact it will have. have your future growth.

Don’t forget to factor in an increase in Medicare costs

Seniors who are enrolled in both Social Security and Medicare have their monthly Part B premiums automatically deducted from their benefits. If this is your situation, and if the cost of Medicare Part B increases substantially in 2025, it could affect your future 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 right now, we also lack 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 may find out by what percentage your Social Security check will increase. But you won’t necessarily know how much extra money you’ll get in each monthly check until you learn more about Medicare.

Ways to cope with lower growth

Recent estimates call for a Social Security COLA of 2.5 percent in 2025. But that number could change if inflation picks up or slows before the end of September.

However, given where we are this year, that 2.5% estimate is unlikely to be that far off. And while we don’t know what Medicare has in store, it’s fair to assume a modest increase in Part B is ahead.

If that leaves you with a net increase 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 where you raised your children. But if heating and maintenance are expensive and property taxes keep rising, downsizing might be a better bet.

It also wouldn’t hurt to train yourself in the gig economy and see if there is a way to increase your income by taking on flexible work. You may find that setting aside a few hours a week makes a world of difference to your finances.