Social Security beneficiaries needed a guaranteed way to maintain their purchasing power over time, so automatic cost-of-living adjustments, or COLAs, were implemented in 1975. Prior to 1975, only special legislation could be used to increase Social Security benefits.
COLAs have been linked to inflation since they were implemented automatically. Fortunately, as you may have noticed, inflation has slowed this year, and as a result, the new cost of living adjustment will only be 2.5% higher.
That is somewhat disappointing when compared to this year’s 3.2% COLA, but a 2.5% COLA is also consistent with the average Social Security COLA over the last ten years. However, some Social Security recipients may not be able to keep the entire amount of their COLA in 2025. Here are a few reasons why yours could be reduced.
Why will Social Security benefits be reduced in 2025?
Medicare costs will likely increase
It is your responsibility to pay your monthly Part B premiums if you are enrolled in Medicare but have not yet received Social Security benefits.
This is made slightly easier if you also receive Social Security and Medicare, as your Social Security benefits are automatically reduced by your monthly Part B costs. The issue, however, is that Medicare Part B will become more expensive in 2025.
The normal monthly Part B premium, which is currently around $174, will be $185 starting now. Your Social Security COLA will fall as a result of the roughly $10 increase, giving you a slightly smaller raise in the coming year.
Increases in Medicare will never do more than eliminate your COLA
Because of increased Medicare spending, you may be disappointed to see your Social Security COLA decrease in 2025. However, there is one thing to be grateful for: your Social Security income will never decrease year after year as Medicare Part B increases.
Because of the “hold harmless” provision, any Part B increase can only reduce your Social Security COLA to zero.
Regardless of Medicare’s future, you are guaranteed to receive at least the same amount of Social Security at the start of each calendar year as you did in December of the previous year, unless there is a specific reason for a smaller check (for example, having benefits garnished due to a past-due tax bill or receiving a reduced check for exceeding Social Security’s earnings-test limit).
Naturally, the majority of Social Security beneficiaries will not have to worry about their 2025 COLA being eliminated. Without Medicare, the average beneficiary is looking at a monthly benefit increase of around $50, while the standard Part B payment is only increasing by about $10.
Even after deducting $10, the average Social Security beneficiary enrolled in Medicare will see an increase of nearly $40. The good news is that if inflation remains low, you may be able to stretch any increase in your Social Security income further.
How much will the Social Security benefits increase in the coming month?
According to the most recent confirmed cost of living adjustment (COLA), Social Security benefits will increase by 2.5% beginning in January 2025 for recipients eligible for the retirement, survivor, and disability insurance (RSDI) program. Given this percentage increase, beneficiaries will receive the following payment amounts:
| Retirement benefits | Social Security benefits | 2.57% COLA increase | 2.63% COLA increase |
| On average | $1,900 | $1,949 | $1,950 |
| Age 62 | $2,710 | $2,780 | $2,781 |
| Age 67 | $3,822 | $3,920 | $3,923 |
| Age 70 | $4,873 | $4,998 | $5,001 |
| Survivor benefits | Social Security benefits | 2.57% COLA increase | 2.63% COLA increase |
| On average | $1,505 | $1,544 | $1,545 |
| Individual | $1,773 | $1,819 | $1,820 |
| 2 Children | $3,653 | $3,747 | $3,749 |
| Disability benefits | Social Security benefits | 2.57% COLA increase | 2.63% COLA increase |
| On average | $1,537 | $1,577 | $1,577 |
| Blind recipients | $2,590 | $2,657 | $2,658 |
| Maximum payment | $3,822 | $3,920 | $3,923 |