The big buzz on the Social Security front for months has centered on 2025’s cost-of-living adjustment (COLA). Each year, Social Security benefits are eligible for a COLA so that recipients can maintain their buying power as inflation drives living costs upward.

On Oct. 10, the Social Security Administration announced that benefits would be rising by 2.5%. That happens to be a much smaller COLA than what recipients have received in recent years. But it also makes sense.

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Social Security COLAs are tied to inflation. Since inflation has cooled nicely in 2024, next year’s benefits increase is only going to be modest. The problem, though, is that some Social Security recipients may not get to keep their 2.5% COLA in full.

Don’t forget about Medicare

The average monthly Social Security benefit is expected to rise from $1,927 to $1,976 once 2025’s COLA takes effect. That’s a $49 increase. But that doesn’t mean you should automatically expect your monthly checks to go up by $49.

One thing that’s missing from this equation is the cost of Medicare Part B. Seniors who are enrolled in Social Security and Medicare at the same time have their monthly Part B premiums deducted from their monthly benefits automatically. This helps ensure that those premiums are paid while eliminating the need to remember to write out an actual check each month, so everyone wins.

The problem, though, is that if the cost of Medicare Part B rises substantially in 2025, it could eat into your Social Security COLA, leaving you with a smaller monthly increase.

As of this writing, Medicare hasn’t announced what the standard monthly premium for Part B will be. That said, this year, the cost of Medicare Part B rose $9.80 from 2023. If there’s a similar increase this year, the typical Social Security recipient who’s also on Medicare may see their monthly benefit check increase by only $39 in 2025 instead of $49.

Of course, the cost of Medicare Part B may not rise to quite the same degree as it did this past year. But remember, Medicare uses a different formula to calculate Part B premiums than what Social Security uses to calculate COLAs. So there’s a good chance your Part B costs will increase to a larger degree than 2.5% in the new year.

It’s also worth noting that higher earners are commonly charged beyond the standard monthly premium for Medicare Part B. However, if your income is significant enough to face an income-related monthly adjustment amount, or IRMAA, for Medicare, then getting a little bit less out of your Social Security COLA likely won’t break your finances in the new year.

Aim to be less reliant on Social Security COLAs

Regardless of Medicare increases, Social Security COLAs often do a poor job of helping seniors keep up with their living costs. That’s because the index used to calculate them — the Consumer Price Index for Urban Wage Earners and Clerical Workers — doesn’t tend to accurately capture the costs retirees face. And all you need to do is read the name of that index carefully to see why. So it’s best to have access to income outside of Social Security.

If you’re already retired and missed the boat on building savings, see if it’s possible to join the gig economy for extra money or get a part-time job you don’t hate. Boosting your income to the tune of a few hundred dollars a month could buy you some wiggle room and relieve monetary stress if your 2025 Social Security checks contain a bit less money than expected due to an increase in Medicare Part B.

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