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social security Beneficiaries see higher cost of living adjustment in recent years, driven by record high inflation.
But the increase next year may not be that big.
Based on new government inflation dataMary Johnson, an independent Social Security and Medicare analyst, estimates that beneficiaries may see their benefits increase by only 2.5% through 2025.
In 2024, more than 71 million Americans, including Social Security and Supplemental Security Income recipients, will have 3.2% cost of living adjustmentAccording to the Social Security Administration.
Soaring inflation pushes annual benefit increases further into 2023, when it emerged Growth 8.7%the highest level in 40 years. Next is up 5.9% In 2022, this also set a recent high at the time.
2021 cost of living adjustment is 1.3%.
Johnson said that if 2.5% cola went into effect in 2025, that would be the average.
Importantly, the 2025 Social Security cost-of-living adjustment estimate may change.
The Social Security Administration is preparing to announce a formal increase in benefits in October. This will include new government inflation data for September. Johnson said the current 2.5% forecast has about a 17% chance of an increase and a 13% chance of a decrease.
The annual Social Security cost-of-living adjustment is calculated using third-quarter data from a subset of the consumer price index known as the Consumer Price Index for Urban Wage Earners and Clerks (CPI-W).
According to the Center for Retirement Studies at Boston College, two factors tend to affect the net amount retirees receive from Social Security in a high-inflation scenario. Found – Benefit taxes and Medicare Part B premiums.
Trump calls for elimination of welfare tax
Up to 85% of Social Security benefits may be subject to federal income taxes.
These taxes apply to combined income, which is the sum of half your Social Security benefit, adjusted gross income, and tax-free interest.
Since these thresholds do not change, more beneficiaries Taxes are being paid on the benefits over time.
Former President Donald Trump calls for end taxes Made Social Security benefits part of his campaign platform.
In his statement, Trump reiterated his plan to “help seniors obtain a regular income” and “not tax Social Security benefits.” postal He made this statement on his social media platform Truth Social on September 9.
Currently, if your total income as an individual filer is between $25,000 and $34,000 ($32,000 and $44,000 if married and filing jointly), you can pay up to 50% of your benefits in tax.
If your combined income exceeds $34,000 and you file separately, or if you are married and file jointly and your combined income exceeds $44,000, your benefits may be taxed at up to 85%.
Trump’s plan to eliminate these taxes would have an impact on the Social Security and Medicare Hospital Insurance Trust Funds, increasing the deficit by an estimated $1.6 trillion to $1.8 trillion by 2035, according to the Committee for a Responsible Federal Budget.
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Alicia Munnell, director of the Center for Retirement Studies at Boston College, said eliminating taxes on Social Security benefits is an “extremely unhelpful idea” because the money helps pay for the program and helps make it more affordable. It keeps improving. Recently written.
However, Monell said the benefit tax could be better structured, with new income thresholds tied to inflation and adjustments to the share of benefits included in adjustable gross income.
The Trump campaign did not immediately respond to a request for comment.
Medicare Part B premiums becoming more expensive
Many retirees pay monthly premiums Medicare Part B – Covers doctors, outpatient hospitals and some home health services – directly from their Social Security benefit checks.
However, while Medicare Part B premiums are rising an average of 5.5% annually, Social Security cost-of-living adjustments are rising an average of 2.6% annually, according to a new analysis from Johnson.
As a result, premium costs represent an increasing portion of Social Security benefits.
Over the past two decades, Medicare Part B premiums and deductibles have grown twice as fast as Social Security’s cost-of-living adjustments, Johnson said.
From 2005 to 2024, Medicare Part B premiums increased by 109.9 percentage points, while Social Security cost-of-living adjustments totaled 52.5 percentage points.
Part of the reason for the large discrepancy, Johnson explained, is that Medicare costs are not included in the annual Social Security COLA calculation.
