Social Security retirees are in line for a raise in 2025. But just how much more will the average retiree get when their new checks start coming in January of next year? Here's what you need to know.
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Expect a 2.6% cost-of-living adjustment next year
No official announcement has been made yet regarding how much more money seniors will get in their Social Security checks next year once their benefit increase happens. But The Senior Citizens League (TSCL), a senior advocacy group, estimates that the benefits boost is likely to come in at 2.6%.
This estimate is based on the current Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) data. CPI-W is a consumer price index that tracks how the cost of goods and services shift over time. The COLA is actually calculated using the average of the CPI-W data for the third quarter of the year. Since that's not available yet, TSCL is basing its estimate on current CPI-W and future projections regarding inflation.
While things could change, it's reasonable based on 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 go up?
The amount your benefits increase due to the COLA is going to depend on how much you are currently receiving from Social Security. So, let's take a look at the average retirement benefits for seniors ages 62, 67, and 70 and apply the 2.6% raise to get a good idea of how much more in benefits the typical retiree may get next year.
| Age | Current Average Retirement Benefit | Average Retirement Benefit After COLA Is Applied in 2025 | Change in 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.
Now, these estimates for the benefits increase aren't 100% exact. That's because the COLA isn't applied to your current benefit, but instead is applied to your standard benefit (called your primary insurance amount, or PIA). That's the amount you would have received had you claimed your first payment right at full retirement age. Your updated PIA is then adjusted up or down based on whether you earned delayed retirement credits or were hit with early filing penalties due to when you started your payments.
If you have Medicare premiums paid directly out of Social Security, as most retirees do, you'll also see some of your raise disappear if premiums increase.
Both of these factors mean that your actual benefits increase may differ even if you are getting the average Social Security benefit for your age group right now. Still, this can still give you a pretty good idea of how much money the typical retiree will bring in once the COLA is applied next year, assuming there's no dramatic change to CPI-W that results in a COLA that's much higher or much lower than current estimates suggest it will be.
Is a big benefits increase a good thing?
A 2.6% COLA would be lower than the benefits increases in the last few years but is still a pretty good raise by historical standards over the past decade or so. Unfortunately, a big boost in benefits isn't necessarily a good thing. After all, this isn't a real "raise" like workers might get for their job performance, but instead is an increase that's just meant to stop you losing buying power due to inflation.
A lower COLA would thus mean inflation has cooled, which would be better for retirees who also have to rely on savings to supplement Social Security that may lose value when prices increase rapidly. So even if you do get a lot of extra money next year, remember it won't necessarily allow you to buy more but rather to just maintain your living standard while paying higher prices.
