Social Security's Big 2025 COLA Announcement Is Just 10 Days Away. Here's What to Expect.

Source The Motley Fool

If you're among the millions of Americans who rely on Social Security to make ends meet, then you may be eager to find out what your 2025 cost-of-living adjustment (COLA) will amount to. At the start of 2024, Social Security recipients saw their benefits rise by 3.2%. And you may be wondering if you can expect a similar boost in the new year.

The Social Security Administration (SSA) won't be able to make an official COLA announcement until October 10. The reason is that Social Security COLAs are calculated based on third quarter inflation data.

Social Security cards.

Image source: Getty Images.

Even though the third quarter of the year just ended, it takes time for the Bureau of Labor Statistics to release an official reading from Consumer Price Index for Urban Wage Earners and Clerical Workers, which is the index Social Security COLAs are based on. And the SSA needs that data to calculate a 2025 COLA.

That said, you don't necessarily have to wait until October 10 to find out everything you need to know about 2025's Social Security COLA. Here's some information that's already available.

An initial estimate calls for a smaller raise than in 2024

Even though we're still missing some key economic data needed to calculate a 2025 COLA officially, experts have a working estimate based on the information they have already. And you should know that the current projection for 2025 is a 2.5% Social Security COLA. That's a considerable dip compared to the 3.2% COLA that arrived at the start of 2024.

However, because Social Security COLAs are tied to inflation, a smaller increase in benefits isn't all bad news. Since the pace of inflation has slowed down, consumers of all ages are benefiting from less drastic price increases. So what you lose in the form of a smaller COLA, you might gain in the form of relief at the pump, supermarket, and just about everywhere.

You may or may not get your 2025 COLA in its entirety

Once an official Social Security COLA is announced, you can take a look at your monthly benefit and apply that percentage to see what sort of an increase you can anticipate. But don't forget to account for a rise in Medicare Part B when running those numbers.

If you're enrolled in Social Security and Medicare at the same time, your Part B premiums are deducted automatically from your monthly Social Security checks. And if the cost of Part B increases dramatically in 2025, it will result in a smaller COLA for you.

A big day for Social Security

You might have plans to check the SSA's website for news of a COLA announcement on October 10. But you should know that a 2025 COLA won't be the only news that's released that day.

The SSA will also update key information about the program for 2025, including:

  • A new earnings-test limit, which applies to people who work and collect Social Security at the same time
  • A new wage cap, which determines how much income is taxed for Social Security purposes
  • A new maximum monthly benefit
  • A new earnings requirement to receive the work credits needed to qualify for Social Security later in life

So even if you're not super concerned with what 2025's Social Security COLA will amount to, it still pays to tune in on October 10 to learn about these other important changes.

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Disclaimer: For information purposes only. Past performance is not indicative of future results.
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