Social Security retirees who have enjoyed big cost-of-living adjustments will face an unpleasant surprise next year.
If you’re receiving Social Security benefits, you’ll get a bigger check starting in 2025. That’s the good news.
Unfortunately, there’s some bad news too. When you get your first check of the new year, you may be surprised to find that the benefits bump is not nearly as big as you were expecting.
Here’s why seniors could be in for an unpleasant surprise next year when they see their first check.
Retirees are getting the smallest benefits bump in years
Over the past couple of years, retirees have received a pretty generous annual benefits increase. In 2024, for example, seniors saw their Social Security checks increase by 3.2%, and the year prior, they saw a whopping 8.7% increase. In 2022, their checks also went up by a significant amount, jumping by 5.9%.
In 2025, on the other hand, retirees will get just 2.5% more in their Social Security checks compared with the amount they’re receiving this year. For the typical senior receiving the average $1,927 monthly benefit, they’ll get just $49 more, with the monthly benefit rising to $1,976.
That’s not a lot of extra money, especially when you consider that Medicare premiums are expected to increase. Since Medicare premiums are taken directly out of most people’s Social Security checks, retirees aren’t even likely to get the full extra $49 that the 2.5% cost-of-living adjustment (COLA) provides for the average senior.
Why is the benefits increase so much smaller this year?
Retirees will receive a smaller benefits increase than they have in years because inflation has begun to cool. While prices surged in the post-pandemic era, inflation is starting to inch closer to the standard 2% rate targeted by the Federal Reserve.
Since the COLA is directly tied to changes in a financial index that measures the cost of living, lower rates of inflation translate to a smaller raise. Of course, while it’s a good thing for seniors that prices aren’t increasing as rapidly, a smaller raise is not something most retirees will be happy about.
That’s especially true as seniors have been losing ground for years on their Social Security benefits. In fact, the Senior Citizens League estimates that retirees have lost around 20% of their buying power since 2008.
The metric used to measure inflation is imperfect, as it compares the year-over-year prices of a basket of goods and services used by urban wage earners and clerical workers. This underestimates how much seniors spend on housing and healthcare, both of which have seen costs rise faster than the overall inflation rate.
With seniors already able to buy less, a 2.5% benefits increase won’t help them catch up — and it could feel like a financial disaster for those who have become used to the big raises common in the post-pandemic era.
Retirees should begin preparing now for the fact that their checks aren’t going to be as big as they may have hoped. If your COLA is smaller than anticipated, adjust your budget so you can keep your spending at a safe rate and avoid running out of money or going into debt and derailing your retirement security.
