Social Security’s 2025 COLA: A Closer Look at Potential Impacts on Seniors
Social Security’s cost-of-living adjustment (COLA) for 2025 is set at just 2.5%. This marks the smallest increase since 2021 and reflects a cooling inflation trend. Unfortunately, many seniors will find themselves bearing increased financial responsibilities next year.
Seniors who receive spousal Social Security benefits may encounter more significant challenges in 2025. These benefits are generally smaller than standard retirement benefits, and the COLA increase will show minimal effect. Knowing what to expect next year can aid in planning and provide a sense of control.
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Projected Increase in Average Spousal Benefits for 2025
As of August 2024, the average spousal Social Security benefit was $910 per month, which significantly trails the $1,920 average monthly benefit for retired workers. This discrepancy arises from the government’s method of calculating spousal benefits.
A spousal benefit can be as much as half of the qualifying worker’s benefit at full retirement age (FRA), which is between 66 and 67 for workers currently. To receive this full amount, the spouse must claim benefits at FRA. Early claims can reduce checks by as much as 35%, resulting in the average spousal benefit being slightly below half of the average retirement benefit.
Next year, all Social Security recipients will enjoy a 2.5% increase due to the 2025 COLA. To estimate your check’s new amount, add 2.5% to your current benefits. For example, this will raise the average spousal benefit from $910 to approximately $933 per month.
Keep in mind, your actual benefit may differ. This estimate is a rough guideline; your personalized COLA notice from the Social Security Administration will arrive by mail in December. If you utilize a my Social Security account, you can check this information in your Message Center as early as December.
It’s natural to feel disheartened by the modest 2025 COLA. An increase of approximately $23 monthly translates to an additional $276 annually, which may not be sufficient to cover rising expenses faced throughout 2024.
Lucky for spousal beneficiaries, many have the option of combining their benefits with their partner’s retirement checks, potentially providing more financial flexibility. Still, combined Social Security income may not fully meet essential living costs.
Upon receiving your expected benefit amount, compare this with your monthly expenditure estimates for 2025. Determine what gap needs to be filled. While tapping into personal savings is ideal, it isn’t feasible for everyone.
Consider reducing expenses or explore alternative income sources during retirement, such as part-time work or rental income. Remaining adaptable and having a plan for 2025 can help alleviate some financial pressure.
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