For seniors, the annual Social Security Administration cost-of-living adjustment is a big deal. It doesn’t just impact how much you receive each month in retirement benefits. It also impacts your Medicare costs. Here’s a look at what to expect from the 2025 Social Security COLA.
How Much More Will Retirees Get in 2025?
The Social Security Administration has announced a cost-of-living adjustment of 2.5% for 2025. This adjustment is based on the Consumer Price Index (CPI-W) from the third quarter of 2023 to the third quarter of 2024.
Exactly how much more you receive each month depends on your benefit amount. For retired workers receiving an average of $1,927 before the increase, the new amount will be $1,976 after the increase, or an increase of $49. For a couple receiving $3,014 a month before the increase, the new amount will be $3,089 after the increase, or an increase of $75.
The Impact on Medicare Costs
Retirees who are receiving Social Security benefits and Medicare can opt to have their Medicare Part B premiums deducted from the Social Security retirement benefits. This is a convenient way to pay your bill and ensure that you don’t miss a payment. However, it also means that increases in your Medicare costs can cancel out increases in your Social Security benefits. For example, if you receive an increase of $20 in benefits one year, but your Medicare premium also increases by $20, you end up with a net change of $0.
This can be frustrating for seniors who are hoping for additional benefits to help with other costs. However, the good news is that increases in Medicare Part B premiums should not cause you to receive smaller benefit checks. This is thanks to the “Hold Harmless” provision.
According to the Social Security Administration, Social Security and CMS work together to ensure that beneficiaries don’t receive a reduction in benefits because of Medicare Part B premium increases. As long as you receive Social Security benefits or are entitled to receive them for November and December and you have your Medicare Part B premiums for December and January deducted from your monthly benefits, you will most likely qualify for the Hold Harmless protection. However, people who have recently enrolled in Medicare Part B, who pay an income-related monthly adjustment amount or who have their premium paid by the state Medicaid agency may not receive this protection.
Planning for Your 2025 Medicare Costs
CMS announces the Medicare Part B premium for the next year in the fall. Once this is known, seniors will be able to calculate how much their Social Security retirement benefits will change after Medicare premiums deductions are accounted for.
Other changes could also impact your costs. In addition to the 2025 COLA, the Social Security Administration says the earning limit for workers is changing in 2025. For workers who are younger than full retirement age, the limit will increase to $23,400. For workers who reach full retirement age in 2025, the limit is increasing to $62,160. If you are younger than your full retirement age (around 66 or 67 depending on when you were born), you’re receiving Social Security benefits and you’re still working, this change could impact your benefits.
There are also changes to Medicare, including a $2,000 out-of-pocket cap for covered Medicare Part D prescription drug costs. If you’ve paid more than $2,000 in out-of-pocket costs for covered prescriptions in the past, this cap could result in significant savings for you.
Do You Need Help Navigating Medicare Changes?
With so many changes to Medicare costs, including the 2025 Social Security COLA, it can be hard to plan. If you’d like help navigating Medicare changes and finding a plan that fits your budget, an agent can assist you. Contact us.