Social Security Benefits Set to Rise, But Rising Medicare Costs May Squeeze Seniors’ Budgets

Next year, all Social Security beneficiaries will see a 2.5% cost-of-living adjustment (COLA). This increase will affect monthly benefits for recipients, including those who are receiving spousal Social Security payments. However, unexpected costs in the form of rising Medicare premiums could overshadow this benefit.

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Medicare Part B Premiums Set to Increase

Seniors enrolled in Medicare currently pay a $174.70 monthly premium for Part B coverage in 2024. This amount will rise to $185.00 next year, reflecting a $10.30 increase. If you have not started claiming Social Security, you will cover this cost out of pocket. This process is similar to paying for private health insurance.

For those receiving Social Security, the Part B premiums are usually deducted directly from benefit checks. While there is an option to pay this monthly premium separately, it is often more convenient to have it automatically deducted to avoid missing payments.

As a result, the benefit amount that retirees actually receive will be less than the apparent increase. In 2025, the average monthly Social Security benefit is expected to rise by $49 to $1,976. However, if Part B premiums are withheld, the increase shrinks to $38.70, leaving beneficiaries with $1,791 to manage all other expenses.

High-income seniors face additional financial impact, as those exceeding certain income thresholds will incur higher Part B premiums, as detailed in the following table.

Data source: Center for Medicare & Medicaid Services.

Individuals in the higher income brackets are likely accustomed to paying larger premiums. Nonetheless, they may still need to make adjustments to manage these increased costs next year.

Prepare for 2025’s Rising Costs

It’s clear that Medicare Part B premium increases will directly affect the amounts Social Security recipients will take home. However, other expenses are rising as well. Medicare Part A deductibles, copays, and the Part B deductible will also see increases next year.

Day-to-day costs—such as food, housing, utilities, and transportation—are also being impacted by inflation. While prices aren’t rising as sharply as a few years back, any increase can still significantly affect retirees, particularly those with limited savings. Establishing a budget for 2025 is essential to gauge the real value of Social Security checks and understand how much additional income may be necessary.

Beneficiaries will receive a personalized COLA notice from the Social Security Administration this month, detailing the exact benefit for 2025. Those with a my Social Security account can access this information through the Message Center.

Creating a strategy to bridge any gaps in coverage left by Social Security becomes essential. Consider reducing some expenses or even exploring part-time job opportunities to supplement your income. If neither option is viable, investigating eligibility for additional government assistance, like Supplemental Security Income (SSI), may provide additional support.

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