Every fall, the Social Security Administration announces cost-of-living adjustments (COLA) that will determine beneficiaries’ monthly payments for the following year. These annual adjustments, based on inflation data in the Consumer Price Index, have long been the practice. However, many beneficiaries don’t fully understand the bottom-line impact to their monthly benefits check—especially if Medicare premiums are automatically deducted from their benefit amount.
Sharon Carson, Retirement Strategist, provides answers to clients’ frequently asked questions.
Here’s what your clients need to know
1. What is the cost-of-living increase for 2025?
Beginning December 31, 2024, monthly Social Security benefits will increase by 2.5%. As an example: Next year, the monthly payment to an individual receiving Social Security benefits of $2,000 in 2024 will increase by $50.
2. Will beneficiaries see the full COLA increase in their monthly checks?
Yes, though it may not be fully visible! Here’s why: While every beneficiary receives the full COLA increase, certain automatic deductions may lower their check amount before it’s direct deposited. For example: Those enrolled in Medicare Part B likely have the monthly insurance premium automatically taken out of their benefit payment. The same is true for individuals enrolled in Medicare Advantage programs (Part D).
Also keep in mind: Medicare premiums typically increase from year to year. Furthermore, because medical inflation is usually higher than that for other goods and services, Part B premiums may increase at a faster rate than COLA increases.
3. Will Medicare premiums increase in 2025?
Yes. In early November, the Centers for Medicare and Medicaid Services (CMS) announced the standard Medicare Part B premium will go from $174.70/month to $185.00, a 5.9% increase. Part B covers physicians’ services, outpatient hospital services, certain home health services, durable medical equipment as well as certain other medical and health services.
4. Can benefit check amounts be lower in 2025 than in 2024?
It’s unlikely. The 2025 COLA should be large enough to cover the higher Medicare premiums for almost all beneficiaries. Moreover, there are legal protections in place to prevent most beneficiaries from losing a portion of their monthly benefits due to an increase in Medicare Part B premiums.
5. Will higher-income beneficiaries be impacted in 2025?
Yes. In 2025, the federal government will add a surcharge to monthly Medicare Parts B and D premiums for individuals aged 65+. This surcharge will affect singles with modified adjusted gross income (MAGI) of more than $106,000, and joint filers with MAGI above $212,000.
6. Do people who delay taking Social Security benefits forfeit COLAs?
No. Individuals receive all prior COLA increases whenever they apply for benefits. Also note: The longer an individual waits to claim Social Security benefits—up to age 70—the greater the amount they will receive each month. Eligibility (for a partial benefit) begins at age 62.
For more information, please see the J.P. Morgan Guide to Retirement.