Social Security Benefits to Increase in 2025: What You Need to Know
A New Year, A New COLA
More than 72.5 million Americans will see a 2.5% cost-of-living adjustment (COLA) in their Social Security and Supplemental Security Income checks in 2025. This increase will be reflected in monthly checks starting in January 2025. Before then, beneficiaries can expect to receive a notice detailing how their monthly checks will change.
Simplified Notices and Changes to Expect
This year, the Social Security Administration will provide a new streamlined one-page notice, which will include exact dates and dollar amounts of new benefits, as well as any deductions. Some key changes to look for in 2025 include:
- Retirement Benefits: A $50 per month increase, on average, due to the 2.5% COLA.
- Medicare Part B Premiums: A $10.30 increase to $185 per month, with annual deductibles rising to $257.
- Federal Taxes: Beneficiaries may want to adjust their tax withholdings, particularly if they anticipate more of their benefits could be taxed.
The Impact of Inflation and Income
While the pace of inflation has subsided, leading to a lower COLA, experts warn that inflation could pick up again, resulting in higher COLAs in the future. Additionally, beneficiaries with higher incomes may be subject to income-related adjustment amounts (IRMAA) that increase their monthly premium payments.
Proactive Planning for Taxes
With Social Security benefits taxed on a formula called combined income, beneficiaries may want to consider proactive tax planning strategies to minimize their tax burden. This includes buying an annuity that lets interest grow tax-deferred or reducing income from other areas, such as IRA withdrawals.
Life-Changing Events and Medicare Premiums
Retirees should also take note if their incomes have meaningfully changed in the past couple of years, as this may affect their monthly Medicare Part B premium rate. Beneficiaries can notify the Social Security Administration of life-changing events that affect their incomes and Medicare premiums by filling out a Form SSA-44.
By understanding these changes and taking proactive steps, beneficiaries can make the most of their Social Security benefits in 2025.
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