As we approach 2025, Social Security beneficiaries may not see as generous of an increase in benefits as they have in recent years. The annual cost-of-living adjustments have been on the rise, driven by record high inflation. However, based on new government inflation data, estimates suggest that beneficiaries may only see a 2.5% increase to benefits in 2025.
In 2024, over 71 million Americans, including Social Security and Supplemental Security Income beneficiaries, received a 3.2% cost-of-living adjustment. This was a significant increase from the 8.7% boost in 2023, the highest in four decades. In 2022, there was a 5.9% raise, and in 2021, the adjustment was 1.3%.
While a 2.5% increase in 2025 would be about average, the estimate is subject to change. The Social Security Administration is set to announce the official increase in October, which will include new government inflation data for September. There is about a 17% chance of the 2.5% estimate increasing and a 13% chance of it decreasing.
It’s important to note that two factors can affect the net amount retirees receive from Social Security during times of high inflation: taxes on benefits and Medicare Part B premiums. Up to 85% of Social Security benefits may be subject to federal income taxes, and retirees may have monthly premium payments for Medicare Part B deducted from their benefit checks.
Former President Donald Trump has called for ending taxes on Social Security benefits as part of his campaign platform. However, this proposal could have significant consequences for the Social Security and Medicare Hospital Insurance trust funds.
As we navigate the changing landscape of Social Security benefits and Medicare costs, it’s essential to stay informed and understand how these factors can impact your financial well-being in retirement. Stay tuned for updates on the 2025 cost-of-living adjustment and other important developments in Personal Finance here at Extreme Investor Network.