Social Security is a crucial source of income for many retirees, and with the recent updates to the monthly checks, there’s a lot of concern about how these changes will affect retirement plans. The average Social Security check in 2024 is $1,907, but things are set to change in 2025 with a new adjustment that will increase the amount by 2.5%. This means that retirees will receive around $1,954 per month.
Understanding the Social Security Changes
The reason behind these changes lies in the Cost-of-Living Adjustment (COLA). COLA is an annual increase that helps Social Security benefits keep up with inflation, meaning it adjusts the benefits to match rising prices for things like food, housing, and healthcare. The 2025 adjustment is a 2.5% increase, which will raise the average Social Security payment from $1,907 to $1,954.
While this increase will help retirees keep up with inflation, it may not cover all of the rising costs. Many people, especially those who rely heavily on Social Security for their income, need to plan carefully to make sure they’re financially stable despite these changes.
What Does This Mean for Supplemental Security Income (SSI)?
For those receiving Supplemental Security Income (SSI), a program that helps individuals who are elderly, blind, or disabled and have limited income, there’s also a COLA increase. SSI benefits will increase from $943 to $967 in 2025. The increase for couples receiving SSI benefits will be from $1,415 to $1,450.
How Social Security Benefits Are Calculated
Social Security benefits are based on your lifetime earnings. The SSA looks at your highest 35 years of earnings to determine your benefit amount. If you haven’t worked for 35 years, they’ll average in zeroes for the missing years, which could lower your benefit.
Another factor that affects how much you receive is the age at which you claim your benefits. If you claim at your Full Retirement Age (FRA), you’ll receive 100% of the benefit you’ve earned. If you claim earlier, say at 62, your benefit could be reduced by up to 30%. However, if you delay your claim until age 70, your benefits will increase by 8% per year.
The Impact of Inflation and COLA Adjustments
Inflation can hit retirees hard because they often live on a fixed income. Things like rent, food, and healthcare tend to increase in price, making it harder for retirees to stretch their benefits. The COLA adjustment helps bridge this gap by increasing benefits to match inflation.
For 2025, the 2.5% COLA increase means retirees will see an additional $47 in their monthly payments. While this is helpful, it’s not always enough to cover all of the rising costs, so it’s essential to plan ahead.
Preparing for Changes in Your Social Security Benefits
Here are some steps retirees can take to prepare for these changes:
- Stay Informed – Regularly check your Social Security benefits statement online by creating a My Social Security account. This will help you stay updated on any changes to your payments.
- Budget for Rising Costs – Keep in mind that prices for things like housing, healthcare, and daily essentials may keep rising. While the COLA increase is helpful, it may not fully cover all of your additional expenses.
- Consider Other Income Sources – If possible, consider part-time work or other ways to increase your income. This could help fill any gaps between your Social Security payments and the actual cost of living.
- Delay Claiming Benefits if You Can – If you can afford to wait until age 70, your monthly Social Security payments will be higher, providing you with greater long-term financial security.
- Consult a Financial Advisor – A financial advisor can help you make the most of your Social Security benefits and create a comprehensive retirement plan that fits your needs.
In Conclusion
Changes to Social Security, such as the 2.5% COLA increase for 2025, are designed to help retirees keep up with inflation. However, it’s important to be proactive and plan for how these changes will affect your retirement. By staying informed and budgeting carefully, retirees can better navigate these changes and ensure they have a secure financial future.