As we approach 2025, the 2.5% cost-of-living adjustment (COLA) for Social Security benefits is set to take effect on January 1st. This adjustment will provide a boost to Social Security recipients, but there is an important exception to note.
According to the Social Security Administration (SSA), the COLA increase of 2.5% will apply to both Social Security benefits and Supplemental Security Income (SSI) payments. Starting with the December 2024 benefits, which will be paid in January 2025, recipients will see an increase in their monthly payments. SSI payments for January will also reflect this 2.5% increase, though because the first of the month falls on a holiday, those payments will be issued at the end of December, as is customary.
Understanding Social Security Benefits
Social Security benefits are financial support provided by the federal government to eligible individuals who qualify due to retirement, disability, or other forms of financial hardship. The SSA oversees five main programs that offer these benefits, each designed for different groups of people:
- Disability Benefits: Monthly payments for individuals with qualifying disabilities or blindness and sufficient work history.
- Survivor Benefits: Support for family members of a deceased worker who paid into Social Security, such as spouses, ex-spouses, children, or dependent parents.
- Family Benefits: Payments to certain family members of individuals who are eligible for retirement or disability benefits.
- Retirement Benefits: Monthly payments that replace part of your income when you stop working or reduce your working hours, based on your work history.
- Supplemental Security Income (SSI): Payments for individuals with disabilities or older adults who have limited income and resources.
For example, in 2022, around 70.6 million Americans were receiving Social Security benefits, with 5.6 million new beneficiaries joining that year. The average age of disabled workers was 55.6 years, and women made up 55% of SSI recipients, with 85% of SSI payments going to individuals with disabilities or blindness.
Why COLA Matters for Social Security Beneficiaries
Each year, adjustments like COLA are made to Social Security benefits to help recipients keep up with inflation and rising living costs. This ensures that beneficiaries’ purchasing power does not diminish over time. The SSA sends out notices in December detailing the COLA adjustments, including the specific amount by which each beneficiary’s check will increase. These notices will also be available online for individuals with a “my Social Security” account.
This shift to online access for COLA notifications and other forms is part of the SSA’s broader effort to streamline services and improve efficiency. Beneficiaries can now access various forms, such as those related to overpayments or disability applications, online without needing to sign physical documents.
The Impact of Medicare Part B Premium Increases
While the 2.5% COLA adjustment will provide some relief, it’s important to note that many Social Security recipients also receive Medicare benefits. One significant change to Medicare for 2025 is an increase in Part B premiums. Though the increase may seem small—around $10 per month—it will be deducted directly from Social Security checks before they are deposited into recipients’ accounts.
For example, the average Social Security retirement benefit is approximately $1,907 per month. With a 2.5% COLA increase, this would translate to an additional $47 per month. However, with the $10 Medicare Part B premium increase, retirees will only see a net gain of $37 per month in their Social Security checks.
Conclusion
The 2.5% COLA increase for 2025 provides a welcome boost to Social Security recipients, helping them keep up with inflation and living costs. However, the increase in Medicare Part B premiums will reduce the net benefit increase for many retirees. As the SSA continues to improve its systems, beneficiaries will have easier access to information and services, with many updates available online to make managing Social Security benefits more convenient.
