The annual Social Security cost-of-living adjustment, or COLA, is based on third-quarter inflation data, so it was officially announced in October when the last of the official CPI data from the third quarter was released.

Now that 2024 is almost over, it’s important to consider how the announced COLA will actually impact the finances of retirees. So, here’s a rundown of how much your benefit could increase, as well as one thing that could make the COLA less meaningful than it sounds.

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Social Security benefits are increasing

The Social Security COLA that is about to go into effect will result in a 2.5% increase in everyone’s Social Security benefits.

Technically speaking, this is the 2024 COLA, as it goes into effect in December 2024. However, because Social Security is paid a month in arrears, this increase will be reflected in the payment that beneficiaries receive in January. For this reason, it is often referred to as the 2025 COLA.

As of the latest available data (November), the average retired worker receives a monthly Social Security benefit of $1,925.46. After applying the 2.5% adjustment, this implies an average retired worker’s benefit of $1,973.60 in January — an increase of approximately $48.

Of course, not everyone who gets Social Security is a retired worker, so here’s what this increase would mean for some other key beneficiary types:

Data source: Social Security Administration.

Of course, these are just averages, and a 2.5% increase could be a higher or lower dollar amount for you. It depends on how much you’re getting now. For example, based on the latest data, the average retired worker who waited beyond their full retirement age to start collecting Social Security will get an increase of about $68 per month in 2025.

If you want to see the expected COLA impact, you can simply multiply your current Social Security benefit before any deductions by 1.025, or you can log into your Social Security account at www.ssa.gov (or create one if you haven’t already).

Medicare premiums take some of the increase away

It’s worth noting that standard Medicare Part B premiums will be $185 per month in 2025, a $10.30 increase compared with 2024. Medicare beneficiaries who collect Social Security typically pay this directly from their Social Security checks. So, if your Social Security payment is set to rise by $40 per month in 2025, for example, the actual increase in your checks will be about $30 after this is accounted for (if you’re enrolled in Medicare).

Each year, it’s important to take Medicare premium changes into account, as they can have a big impact on the actual percentage change in your monthly Social Security payments. As an example, Social Security recipients got an 8.7% COLA in 2023, plus Medicare premiums decreased by about $5 per month, making the effective increase even larger.

The bottom line

The Social Security COLA will result in a net increase for most retirees, but it will be the smallest percentage increase in several years. And since Social Security COLAs are based on backwards-looking inflation data, it remains to be seen if it will actually feel like a raise throughout 2025.

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