Here’s how much the average Social Security benefit will increase next year if the current COLA estimate is correct

To calculate an official Social Security cost of living adjustment (COLA), we need three pieces of information: July, August, and September inflation data.

At this point, we have had data from July and August for some time. However, since September has just ended, it is still too early to determine this month’s Consumer Price Index for Urban Wage Earners and Office Workers (CPI-W) against which COLAs will be measured.

Rather, this information is expected to be released on October 10th. And once that happens, the Social Security Administration (SSA) can officially calculate a COLA for 2025.

However, there is a working estimate for next year’s Social Security COLA based on the CPI-W values ​​for July and August. And if that number is correct, we can use it to get a sense of how much the average Social Security paycheck will increase. But you also need to treat this calculation with caution for one important reason.

A smaller COLA is likely in stock

At the start of 2024, Social Security benefits received a COLA of 3.2%. However, the increase next year is likely to be smaller. Estimates suggest a 2.5% increase in 2025 based on inflation data for July and August.

Meanwhile, the average retiree receiving Social Security now receives about $1,920 per month. If the 2.5% COLA estimate turns out to be correct, that means an additional $48 per month for the typical Social Security recipient in 2025. But before you get too committed to a $48 increase in your monthly income, realize that there is a wild card factor you need to consider.

Will a Medicare Part B increase impact your Social Security COLA?

Seniors who are simultaneously enrolled in Social Security and Medicare will have their Part B premiums immediately deducted from their monthly benefits. In 2024, Medicare Part B costs increased by $9.80 compared to 2023.

At this time, Medicare has not announced what the standard monthly premium for Part B will be in 2025. However, if the increase is similar, next year’s Social Security COLA will be saved by about $10, increasing the average monthly check by only $38 instead of $48.

Additionally, Medicare may not be able to announce an official Part B premium until after October 10th. Even though you may receive some helpful information from the SSA that day, you may have to wait a little longer to see how much your monthly benefit will actually increase.

All of this is good news

You may not like the idea of ​​a Social Security COLA of just 2.5% in 2025. And you may downright hate the idea of ​​your Medicare premium costs increasing enough to cut your COLA.

The story continues

However, keep in mind that the reason for this 2.5% COLA – and not a larger increase – is to cool inflation. And slower inflation could mean you get more purchasing power from your monthly Social Security benefits — even after accounting for an increase in Medicare Part B costs.

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Here’s how much the average Social Security benefit will increase next year if the current COLA estimate is correct. This was originally published by The Motley Fool