Social Security’s cost-of-living adjustments (COLAs) are well known. Every year retirees await anxiously for the third trimester of the year to arrive so that the following year’s adjustment can be calculated. These COLAs are meant to help retirees keep up with their ongoing expenses, with one small caveat, the COLA comes after the expenses have risen, meaning retirees can never get back the extra savings they have spent.

These adjustments are now automatic, even if they were not always, and they are one of the highlights of those on fixed income, as they are meant to rise with inflation and help them keep their standard of living. This is why a small COLA, like the one seniors will receive in 2025 is so disappointing. Even though inflation rose above the COLA in the first few months of 2024 making that increase insufficient, by the end of the year it had cooled down a lot and the end result was a 2,5% increase in benefits for the new year 2025.

This increase means that the average monthly benefit of $1,927 should rise to $1,976, making it a $49 increase. There is just one problem with this, and it is that, regrettably, many seniors will not be able to enjoy this increase as it will go directly into paying for the projected Medicare increase.

Will your Medicare Part B premiums eat into your 2025 Social Security COLA?

For those who may not know this, once you turn 65 years old you are eligible for Medicare enrollment, and although the program has a part that is free for most enrollees (Part A), there is a part that needs to be paid for, and it is taken out from Social Security monthly payments automatically. Known as Part B, this takes care of:

• Services from doctors and other health care providers
• Outpatient care
• Home health care
• Durable medical equipment (like wheelchairs, walkers, hospital beds, and other equipment)
• Many preventive services (like screenings, shots or vaccines, and yearly “Wellness” visits)

The bad news for seniors enrolled in Medicare is that Part B premiums have increased this year and in 2025, the standard monthly Part B premium will be rising from $174.70 to $185. That’s an increase of $10.30 according to the Centers for Medicare & Medicaid Services.

So, for seniors who will get their premium deducted from their monthly benefits automatically and receive the average Social Security benefits, their increase will be of $39 instead of the projected $49.

For those who have a lot of savings and do not depend on benefits to make ends meet, this is not a big deal, in fact, probably these seniors are not enrolled in Part B, but have a more tailored Medicare Advantage plan that adapts to their needs, but for those who do depend on Part B, the small COLA increase coupled with the Part B increase may see their finances stagnate and not be enough to cover expenses.

There are a few things seniors can do to avoid being negatively impacted by the changes, and although many will not like the options, it is better to cope with the issue in a productive way than to struggle with making ends meet. First is, if you have not fully retired, keep working for a little longer and increase your monthly benefit that way. If you have worked, consider part time work like gig work, which is an extremely flexible way to earn money, or a traditional part-time job with preset hours. On top of helping with finances it may help you keep active and meet more people, all of which help with mental health and mobility.

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