Social Security beneficiaries need to prepare for a cost-of-living adjustment (COLA) smaller than in previous years. The COLA for 2025 won’t even come any close to the 8.7% increase that Social Security and other benefits received in 2023, and it will be below the 3.4% of 2024.
The non-partisan advocacy group, the Senior Citizens League, estimates the COLA for 2025 to be 2.66%, up from 2.6% last month and 1.75% two months ago. While 2.66% is certainly better than 1.75%, all these figures might lag behind inflation. Monthly estimates change and remain preliminary for now.
The COLA adjustment is based on the average inflation rate during the third quarter of each year, meaning July, August, and September, and is compared to the same period from the previous year. Since we have not yet reached that quarter, any projection for now is just an estimate and not the final figure.
Rising Costs to Affect Social Security Beneficiaries
Retiree advocates warn that the projected benefit increases are not sufficient to keep up with inflation and the rising cost of living. This includes expenses related to increases in Medicare Part B. Medicare Part B is an optional medical insurance that helps cover outpatient and preventive medical services and complements Part A. It covers doctor visits, consultations with primary care physicians, specialists, and other qualified medical providers. It also covers exams, vaccinations, and other services to detect and prevent illnesses.
Outpatient surgeries, diagnostic tests, physical therapy, and other services that do not require hospitalization, as well as individual and group therapy, treatments for drug and alcohol addiction, and other mental health episodes are also covered by Medicare.
Many Medicare Advantage providers have been raising costs or cutting the number of benefits they can admit. All these cost increases, along with other areas such as food, transportation, and housing, have been rising in recent months. Retirees and other Social Security beneficiaries are among the most affected groups by these increases.
How Much Do Retirees Rely on Social Security, and How Much Does Inflation Affect Them?
According to a 2024 survey of older adults by TSCL, 71% of retirees said that household costs increased by more than 3.2% in 2023, surpassing the Social Security COLA adjustment. Fifty-three percent said they had spent emergency savings, while 43% said household expenses increased by more than $185 per month. Sixty-one percent indicated that food is their biggest expense.
If the COLA increases by 2.6% in 2025, it will only represent about an extra $45 in a retiree’s pocket. How much can that buy a month? Not much, really. Around 70 million people receive benefits from various programs managed by the Social Security Administration. In December 2023, approximately 66 million people across the United States were receiving Social Security retirement benefits.
The average retirement age is 62, which is unfortunate because these individuals have claimed their benefits at the earliest possible age. This undoubtedly meant a reduction in their monthly retirement checks. The average monthly Social Security benefit for retirees was $1,907 in December 2023.
The Maximum $4,873/MO From Social Security: Who Can Get It?
The maximum Social Security benefit for 2024 is $4,873, but not everyone can access that amount. It is available to a select group of retirees who have met three basic requirements. The first is delayed retirement, meaning they waited until age 70 or later to start claiming their retirement benefits.
The second requirement is that they were high-income earners because the maximum benefit is based on the earnings they had in a lucrative job during their best 35 years.
The last requirement is having worked for at least 35 years and having made full contributions throughout that period. This is why only a small percentage of retirees meet all the requirements to access the maximum Social Security benefit of $4,873 in 2024.