If you’re on Social Security and turning 65 in 2025, there’s good news! The cost-of-living adjustment (COLA) for next year promises to add a little extra to your monthly payments.
While the percentage increase applies equally to all age groups, the actual dollar amount varies depending on how much you’re already receiving.
Starting January 3, 2025, these adjustments will kick in, boosting the benefits of millions of retirees. Let’s break down what this means for 65-year-olds and others on Social Security.
COLA Basics
COLA adjustments are designed to match inflation, helping beneficiaries maintain their purchasing power as living costs rise. For 2025, the announced COLA increase translates to approximately 2.5%. The percentage remains the same for everyone, but the dollar increase depends on your current Social Security payment.
Impact on Different Payments
Here’s how the 2.5% COLA increase affects payments of various sizes:
| Monthly Payment | Monthly Increase (2.5%) | Annual Increase |
|---|---|---|
| $500 | $12.50 | $150 |
| $1,000 | $25 | $300 |
| $2,000 | $50 | $600 |
| $3,000 | $75 | $900 |
| $4,000 | $100 | $1,200 |
For lower earners, the increase might seem modest, but it still makes a noticeable difference over the course of a year. For example, someone receiving $500 monthly will see an extra $12.50 per month or $150 annually. On the other hand, high earners with a $3,000 benefit will enjoy an extra $900 per year.
What About Larger Payments?
If you’re a high earner receiving $4,000 monthly, the 2025 COLA adjustment adds a whopping $100 per month to your benefits. That’s $1,200 extra over the year. However, this level of benefit is rare for those filing at age 65. To qualify, you would need to have been a top earner throughout your career and delayed filing until at least full retirement age.
Timing
The last Social Security payments of 2024 will not include the 2025 COLA adjustment. However, starting January 3, 2025, the updated benefits will be distributed. The adjustment ensures that retirees can better cope with rising costs of essentials like groceries, healthcare, and utilities.
Filing Early vs. Waiting
It’s worth noting that filing for Social Security at 65, before reaching your Full Retirement Age (FRA), typically reduces your benefits. This reduction also applies to COLA increases, meaning the percentage increase is calculated on a lower baseline. Waiting until FRA or beyond could lead to significantly higher monthly benefits, along with larger COLA adjustments in the future.
Social Security’s COLA is a critical tool for retirees, helping their benefits keep pace with inflation. While the increases might not seem monumental on a month-to-month basis, the annual totals can provide a welcome cushion. For 65-year-olds and others, 2025’s adjustments are a reminder of the program’s continued importance in ensuring financial stability during retirement.
