Social Security retirees are in line for a raise in 2025. But how much more will the average retiree receive when their new checks start arriving in January of next year? Here’s what you need to know.
Expect a 2.6% cost of living adjustment next year
No official announcement has yet been made about how much more seniors will receive in their Social Security checks next year once their benefits increase. But the Senior Citizens League (TSCL), an advocacy group for seniors, estimates the benefit increase should be 2.6 percent.
This estimate is based on current data from the Consumer Price Index for Urban Wage Earners and Office Workers (CPI-W). The CPI-W is a consumer price index that tracks changes in the cost of goods and services over time. The COLA is actually calculated from the average of CPI-W data from the third quarter of the year. As this is not yet available, TSCL bases its estimate on current CPI-W and future inflation projections.
Although things may change, it is reasonable, given current trends, to expect that the Social Security COLA will be somewhere around TSCL’s projected figure in 2025.
How much could the average retirement benefit increase?
How much your benefits increase due to the COLA will depend on how much you currently receive from Social Security. So, let’s take a look at average retirement benefits for people aged 62, 67 and 70 and apply the 2.6% increase to get a good idea of how much more in benefits the typical retiree could receive next year.
|
Age |
Current Average Retirement Benefit |
Average retirement benefit after COLA application in 2025 |
Modification of the monthly social security benefit |
|---|---|---|---|
|
62 |
$1,298.26 |
$1,332.01 |
$33.75 |
|
67 |
$1,563.06 |
$1,603.70 |
$40.64 |
|
70 |
$2,037.54 |
$2,090.52 |
$52.98 |
Table calculations: Author.
However, these estimates of benefit increases are not 100% accurate. This is because the COLA is not applied to your current benefit, but rather to your standard benefit (called the primary insurance amount, or PIA). This is the amount you would have received if you had claimed your first payment at full retirement age. Your updated PIA is then adjusted up or down depending on whether you earned delayed retirement credits or were hit with early filing penalties due to when you started your payments.
If your Medicare premiums are paid directly by Social Security, as is the case for most retirees, you Also see part of your increase disappear if premiums increase.
These two factors mean that your actual benefit increase may differ even if you currently receive the average Social Security benefit for your age group. Nonetheless, this can still give you a pretty good idea of how much money a typical retiree will earn once the COLA kicks in next year, assuming there is no drastic change in the CPI- W which would result in a much higher or much lower COLA than next year. current estimates suggest this will be the case.
Is a significant increase in benefits a good thing?
A COLA of 2.6% would be lower than…
