THE SOCIAL Security Administration has made its annual cost-of-living adjustment announcement, giving recipients an idea of how much more money they will receive in 2025.
The predictions made by experts throughout the year have been confirmed as the increase is set to kick in at 2.5%.
The Senior Citizens League, a nonpartisan advocacy group for senior citizens, has recently forecast a lower COLA for 2025 compared to the 3.2% increase in 2024.
Their latest prediction suggested a 2.5% COLA, a slight drop from their previous estimate of 2.57% in August.
This 2025 COLA would mean an average increase of $48 per month in Social Security benefits, bringing the average monthly payment to $1,968.
While this is lower than in recent years, it’s still close to the 20-year historical average of 2.6%.
FINANCIAL FEARS
For many beneficiaries, a 2.5% increase might not seem like enough.
However, a lower COLA typically signals that inflation is slowing down, which could lead to a reduction in the cost of daily necessities.
It’s important to remember that the $48 increase is just an average. Individual benefit increases will vary based on factors like the age at which you claim Social Security.
For instance, those who wait until age 70 to file for benefits will receive a larger monthly payment compared to those who apply at 62.
The annual COLA is closely monitored by seniors, as it’s meant to help them keep pace with rising living costs.
In recent years, COLA increases have been as high as 8.7%, but many beneficiaries feel it’s still not enough.
A survey by the Senior Citizens League found that 69% of respondents said their household costs outpaced the COLA, with food and housing costs being the biggest concerns.
FULL RETIREMENT AGE IN A NUTSHELL
Americans can start claiming Social Security retirement benefits as early as age 62, but doing so will result in a reduced monthly payment.
Full benefits are only available once an individual reaches their full retirement age, which varies depending on their birth year.
If they delay taking benefits beyond their full retirement age, up until age 70, their monthly benefit will increase.
WHEN SOCIAL SECURITY PAYMENTS ARE MADE
Social Security payments are issued on the second, third, or fourth Wednesday of each month based on the recipient’s birthdate:
- Second Wednesday: For individuals born between the 1st and 10th of the month
- Third Wednesday: For those born between the 11th and 20th
- Fourth Wednesday: For those born between the 21st and 31st
For those who claim benefits early, a small percentage is deducted for each month prior to reaching full retirement age.
To understand how much benefits will be reduced if they start at 62, individuals can refer to the following, which factors in their birth year and provides estimates based on a full retirement benefit of $1,000.
Percentages are approximate, according to the SSA.
- Age: 66
- Months between age 62 and FRA: 48
- Benefit reduced by: 25.00%
- Age 66 and two months
- Months between age 62 and FRA: 50
- Benefit reduced by: 25.83%
- Age 66 and four months
- Months between age 62 and FRA: 52
- Benefit reduced by: 26.67%
- Age 66 and six months
- Months between age 62 and FRA: 54
- Benefit reduced by: 27.50%
- Age 66 and eight months
- Months between age 62 and FRA: 56
- Benefit reduced by: 28.33%
- Age 66 and 10 months
- Months between age 62 and FRA: 58
- Benefit reduced by: 29.17%
- Age 67
- Months between age 62 and FRA: 60
- Benefit reduced by: 30.00%
Deciding when to start collecting Social Security benefits comes with both pros and cons.
Taking benefits before reaching full retirement age means individuals will receive payments for a longer period but at a reduced amount.
On the other hand, delaying benefits past the full retirement age allows Americans to earn delayed retirement credits, which increase the monthly payment.
Everyone’s situation is unique, so it’s important to weigh personal factors, like financial needs and health when planning the right time to begin receiving benefits.
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