All Social Security beneficiaries are getting a 2.5% cost-of-living adjustment (COLA) next year — or at least they are on paper. This will increase monthly benefit amounts for all recipients, including those claiming spousal Social Security.

At the same time, a crucial retiree expense is set to rise in 2025. It likely won’t eat up your entire COLA, but it may leave you with less to spend than you anticipated.

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Medicare Part B premiums are rising next year

Seniors on Medicare pay a $174.70 monthly premium for Part B coverage in 2024. Next year, we’ll see this climb to $185.00 — a $10.30 increase. If you’re not claiming Social Security yet, you pay this premium out of pocket, just as you would with any private health insurance plan.

Once you begin Social Security, your Part B premiums generally come out of your monthly benefit checks. You can opt out of this, but then you’d have to pay this bill separately each month. It’s often more convenient just to have the premium come out of your checks so you don’t have to remember to pay it yourself.

This means that the Social Security benefit you actually receive will be smaller than your stated monthly benefit. For example, the average monthly Social Security benefit is expected to climb $49 to $1,976 in 2025. But if you have Medicare Part B premiums withheld, you’ll actually only get $38.70 more per month next year, and you’ll have just $1,791 to cover your other expenses after withholding.

High earners could lose even more from their Social Security benefits because Medicare charges higher Part B premiums to seniors with incomes over certain thresholds, as outlined in the table below.

Data source: Center for Medicare & Medicaid Services.

These individuals are probably used to paying larger Part B premiums due to their high incomes, but they may still need to adjust their budgets a little bit to accommodate higher Medicare costs next year.

Start planning for 2025

The effect that higher Medicare Part B premiums have on your Social Security benefit is noticeable because it comes directly out of your checks. But that’s not the only cost rising next year. Other aspects of Medicare, including Part A deductibles and copays and the Part B deductible, are rising as well.

There are everyday expenses like food, housing, utilities, and transportation to address, too. These have also gone up due to inflation. While the cost of goods isn’t rising as quickly as it was a few years ago, even a small increase can take a toll on retirees, especially those without adequate personal savings to supplement their Social Security checks. That’s why it’s important to have a budget going into 2025, so you understand how far your checks will go and how much you’ll need to cover with income from other sources.

If you haven’t already, you should receive a personalized COLA notice from the Social Security Administration at some point this month giving your exact 2025 Social Security benefit. You can also access this through your Message Center if you have a my Social Security account.

Try to come up with a plan to cover what Social Security won’t next year. This might involve cutting back expenses, or perhaps even taking on a part-time job to increase your available income. If that’s not an option, check to see if you qualify for other government benefits, like Supplemental Security Income (SSI), to help you make ends meet.

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