Social Security Just Announced a Cost-of-Living Increase

Here’s How Much You’ll Get

According to data collected by The Senior List, the average retiree spends $2,984 per month, about $1,300 more than the average Social Security income, and 43% of retirees are more worried about their finances now than before they retired. “In addition, more than half of retirees feel like they’re living month to month, and more than 25% frequently stress about affording basic necessities,” says Amie Clark, co-founder and editor-in-chief of The Senior List.

So, it’s welcome news that the Social Security Administration just announced a cost-of-living increase. But just how much more money will you see on your Social Security check, and will it make a dent in your retirement costs? We talked to Social Security, retirement and money experts to find out.

What is the Social Security cost-of-living increase, exactly?

The cost-of-living increase is just what it sounds like—adjustments to Social Security payments based on increased costs of basic expenses—and it’s a relatively new thing.

“The cost-of-living adjustment, or COLA, was enacted by Congress as part of the 1972 Social Security Amendments, and automatic annual COLAs began in 1975,” explains Kevin Walton, a registered Social Security analyst certified by the National Association of Social Security Analysts. “Before that, benefits were increased only when Congress enacted special legislation.”

Since then, COLA has become something all beneficiaries can count on each year. “The Social Security cost-of-living adjustment is an annual increase to every recipient’s benefits based on the change in the consumer price index over the past year,” says certified financial planner Stephen Kates, the principal financial analyst for the site RetireGuide.

How much is the latest increase?

The just-announced increase for 2025 will be 2.5%, and the amount in each check will vary. “Based on the average monthly Social Security benefit in 2024 ($1,862), this increase will amount to approximately $47 per month, or $559 per year,” Kates says.

That’s lower than the increases we’ve seen in recent years because the inflation rate has fallen substantially from its peak in 2022. “The past few years had high increases but only because the cost of goods was rising quickly,” Kates says. “The 2.5% increase is close to the average over a multi-decade period and is far from the lowest. There were multiple years during the 2010s when there was no increase at all.”

How can you calculate how big your check will be?

Before you do the calculation, don’t get too excited. You’re not going to see a ton of extra money in those checks.

Here’s the trick to figuring out your 2025 Social Security income: “Take the gross monthly or annual amount you will receive and multiply it by 1.025,” Kates says. “This will give you your new gross check amount, and if you have yet to take Social Security, you can determine your eligible benefits by creating an account on SSA.gov.”

The Social Security Administration will start sending checks with the new amounts in January 2025.

Source: rd.com©

Photo by Veronique D/Getty Images