We still have two months of inflation data left, but, for the moment, there are those who estimate that Social Security benefits could increase by 2.57%, due to the cost of living adjustment (COLA) in 2025. Some retirees could have to pay an additional $47 a month starting in 2025, if they are beneficiaries of the average of about $1,840 a month. But remember that would be before any increase in Medicare Part B premiums, which will be announced later in 2024.
It wouldn’t be much of a gain, as inflation has been cooling over the past year. And, if that estimate turns out to be correct, the COLA increase would be slightly less than the 3.2% increase in benefits for more than 71 million people in 2024. Overall, retirees and those receiving Supplemental Security Income benefits could see a fairly average increase.
What Many Do Not Understand About How COLA Increments Work
Various questionable advice has been seen on the Internet implying that it might be better to retire in 2024 than 2025 to secure that COLA increase for the following year. But that kind of advice doesn’t make sense right off the bat. Most people don’t realize that they will automatically benefit from next year’s COLA, even if they haven’t yet applied for Social Security, as long as they are at least 62 or older in 2024.
“The COLA should not be used to determine a retirement date at all because it is automatically included in the benefit calculation used by Social Security,” said Mary Johnson, an independent Social Security and Medicare policy analyst who has been forecasting COLA increases. for some years. “In other words, the potential benefit amount is adjusted for inflation before you even claim it.”
The Social Security Administration confirmed that people are eligible for increases in cost-of-living benefits beginning the year they turn 62. And that’s true even if they don’t receive benefits until they reach full retirement age, which is now 67 for those born in 1960 or later, or even if they wait as long as possible to claim higher monthly benefits at age 70. Regardless of your full retirement age, Social Security notes, your monthly payment will be higher the longer you wait to apply, up to age 70.
“We add cost of living increases to their benefits starting the year they turn 62. Benefits are adjusted annually to reflect the increase, if any, in the cost of living as measured by the Consumer Price Index,” according to Darren Lutz, spokesman for the Social Security Administration.
More Data Will Be Needed for the Final Inflation Adjustment
The latest inflation figures from last July offer the first clue when it comes to forecasting the calculation of the Social Security COLA for 2025. The Senior Citizens League, a nonpartisan advocacy group, issued the 2.57% estimate shortly after the U.S. Bureau of Labor Statistics released July inflation data on Aug. 14.Mark Zandi, chief economist at Moody’s, said Moody’s estimates a COLA increase of 2.6%, which is in line with the Senior Citizens League’s figure.
“Inflation is moderating because the consequences of the pandemic and the Russian war — which caused high inflation in 2021 and 2022 — are largely behind us,” Zandi said.