It is common knowledge that Social Security uses cost-of-living adjustments, sometimes known as COLAs. On an annual basis, retirees eagerly anticipate the arrival of the third trimester of the year in order to compute the adjustment for the next year.
These cost-of-living adjustments (COLAs) are intended to assist retirees in meeting their ongoing expenses; however, there is a little catch: the COLA is only applied after the expenses have increased. This means that retirees will never be able to recover back the additional funds that they have spent.
These adjustments are now automatic, even if they were not always the case. They are one of the highlights for those who are on a fixed income, as they are intended to increase in line with inflation and assist them in maintaining their level of living during the process.
It is for this reason that a modest cost-of-living adjustment (COLA), such as the one that will be provided to elderly citizens in 2025, is so disheartening.
Despite the fact that inflation was substantially higher than the cost of living adjustment (COLA) in the first few months of 2024, which rendered that increase insufficient, inflation had significantly slowed down by the end of the year, which ultimately contributed to a 2.5% increase in benefits for the new year 2025.
The average monthly benefit, which was previously $1,927, is expected to climb to $1,976 as a result of this increase, which represents a $49 increase.
There is only one issue with this solution, and that is the fact that, unfortunately, a great number of older citizens will not be able to take advantage of this rise because it will be used to pay for the anticipated increase in Medicare contributions.
Will your Medicare Part B premiums eat into your 2025 Social Security COLA?
As a reminder to those who might not be aware of it, once you reach the age of 65, you become eligible to participate in Medicare.
Although the majority of people who enroll in Medicare are eligible for a portion of the program that is free of charge (Part A), there is another portion of the program that requires payment, and it is deducted from the monthly payments that you receive from Social Security. This, which is referred to as Part B, takes care of:
- Provision of medical services by physicians and other medical professionals
- The provision of outpatient care
- Home health care services
- Medical devices that are capable of withstanding repeated use, such as wheelchairs, walkers, hospital beds, and other devices
- The provision of several preventative services, such as screenings, vaccinations, or shots, as well as annual “Wellness” visits
The bad news for older citizens who are enrolled in Medicare is that the premiums for Part B have increased this year, and the percentage of the typical monthly Part B cost that will climb from $174.70 to $185 in 2025 is also increasing. According to numbers provided by the Centers for Medicare & Medicaid Services, this is an increase of $10.30.
Therefore, the increase for elderly citizens who will have their premiums automatically taken from their monthly benefits and who would get the average amount of Social Security payments will be $39, rather than the $49.
This is not a big deal for those seniors who have a lot of savings and do not rely on benefits to make ends meet. In fact, it is likely that these seniors are not enrolled in Part B, but they have a more customized Medicare Advantage plan that adapts to their needs.
However, for those seniors who do rely on Part B, the small increase in the cost-of-living adjustment (COLA) combined with the increase in Part B may cause their finances to stagnate and not be sufficient to cover expenses.
There are a few things that elderly citizens may do to prevent being negatively impacted by the changes. Although many of them will not like the possibilities, it is preferable to deal with the problem in a productive manner rather than to battle with making ends meet.
Keeping working for a little longer and increasing your monthly benefit in this way is the first step to take if you have not yet reached full retirement age.
If you have previous work experience, you might want to think about participating in a part-time job, such as gig work, which is a very flexible method to earn money, or a regular part-time employment that has predetermined hours.
You may be able to keep active and meet new people, both of which are beneficial to your mental health and mobility, in addition to the fact that it may help you with your income.