Introduction to COLA Adjustments
There has been talk regarding the amount of the Social Security cost-of-living adjustment (COLA) for 2025, with the Senior Citizens League estimating a potential increase of approximately 2.5%. This number is based on the current inflation rate, but it remains uncertain as benefits will officially be adjusted based on inflation in September of 2024.
Effects of Medicare on the benefits paid to Social Security
If Social Security benefits are a part of your income, it is important to understand that any increase to COLA may involve some decrease in Medicare premiums. For seniors receiving both Social Security and Medicare, the premiums are deducted directly from Social Security benefits. So the increased benefit may amount to receiving less in Social Security due to higher Medicare costs, meaning it could be prudent to follow both changes.
Projected 2025 Increase
For over 70 million Social Security claimants around the US, the expected average average increase monthly is about 48.00. For a 2.5% increase, if it happens, the average Social Security benefit would be an average of 1968/month.
While greater than the 3.2% increase in 2024, 2.5% would also follow the historical norm of roughly 2.6% over the past two decades. The official COLA amount will be set by the Social Security Administration (SSA) in mid October of 2024 at the same time they announce adjustments for Medicaid premiums.
Who’s Eligible for COLA
To be eligible for COLA payments for 2025, there are certain eligibility requirements including being elderly, disabled, or low income. For example, one must be 65 or older, have limited resources, or blind.
Earnings Test Limit for 2025
Seniors with work income, collecting Social Security can supplement their income and the work will have limited earnings as appropriate. Currently the earnings limit for non-full retirement age seniors is 22,320 or 59,520 for those whose birthday is the end of calendar year 2024 or earlier. Earnings limits can likely increase due to inflation in 2025.