Here’s how much Social Security’s estimated cost of living adjustment (COLA) in 2025 could increase today’s maximum benefit

Today’s richest Social Security recipients earn a whopping $4,873 per month. That’s more than $58,000 a year, and in 2025 they’ll get even more. These seniors will receive the same cost of living adjustment (COLA) as everyone else starting in January.

COLAs are percentages, so everyone’s checks increase by a certain percentage of their current checks. For this reason, those who have the largest checks today will also see the largest increases in dollar value. But they might get less than you imagine.

The COLA in 2025 is expected to be around 2.5%.

The latest projections from the Senior Citizens League (TSCL) put the Social Security COLA at about 2.5% in 2025. This would increase the checks of those currently receiving the maximum pension by about $122 per month, bringing them to $4,995 per month. That’s another $1,464 per year.

For most, getting the biggest check possible is a drop in the bucket. To qualify for the highest Social Security benefit, you must earn the maximum Social Security taxable income ($168,600 in 2024) in at least 35 years And Delay your Social Security claim until age 70. This is quite difficult to enforce. Most people who do this probably don’t care about money and will be able to support themselves regardless of where the COLA comes from.

The interesting thing about these people is that they may not be Social Security’s top earners for long. The Social Security benefit formula changes every year, and the change may slightly increase the maximum benefit. Soon, a new group of 70-year-old, high-earning applicants could receive even bigger checks. But they won’t know how much they will receive until the Social Security Administration announces the maximum benefit for 2025. Typically, this information will be shared at some point in connection with the COLA announcement.

The average COLA increase will be much smaller

The average monthly Social Security benefit is $1,920 in August 2024. Add to that a 2.5% COLA and you’ll get $1,968 per month – a $48 increase over the current benefit. That may not be enough to cover retirees’ rising costs.

There is a small chance that the COLA will be higher than the expected 2.5%. However, this would require high inflation in September, and indeed inflation has cooled in recent months. So if anything, the COLA will likely be slightly lower than current estimates.

Once you know the official COLA on October 10, 2024, you can estimate what your checks will be next year by adding the COLA percentage to your current checks. You will also receive a personalized COLA notice from the Social Security Administration in December with the exact amount of your 2025 benefits.

The story continues

After you determine how much you will receive from the program, you can plan the budget for next year. If you’re worried your checks won’t go as far as they do today, you may need to look for other sources of retirement income to make ends meet. This could include a job, rental income or other government benefits.

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Here’s how much Social Security’s estimated cost of living adjustment (COLA) in 2025 could increase today’s maximum benefit was originally published by The Motley Fool