Personal Finance

Social Security's 2025 COLA Is Now a Reality. Here's How Much it Benefits the Average Senior

Christy Bieber

Published: January 20, 2025 11:19 am

When you are on  Social Security, you can expect your retirement benefits to increase during most years. That’s because Cost of Living Adjustments (COLAs) typically happen automatically from year to year. Since the price of goods and services increases each year, there’s a process built in to ensure that retirees don’t lose buying power.

The COLA formula resulted in retirees getting a benefits increase in 2025. Since the new year is underway, that raise is now in effect and seniors should be getting bigger checks now than they received before. But, just how much will this actually benefit the average retiree?

This is how much extra the average retiree will receive in 2025

Social Security COLAs are calculated as a percentage of a retiree’s current benefits. To understand how much more the typical senior will receive, it’s important to know what the average benefit was in 2024. As of the end of last year, the average monthly check for retired workers was $1,925.46.

This average check will increase by 2.5% in 2025. That’s because retirees are getting a 2.5% COLA. That’s a significantly smaller COLA than last year when retirees saw their checks increase by 3.2%.

The benefits increase is smaller for 2025 because the formula used to calculate COLAs takes inflation into account. Since prices didn’t rise as much last year, the COLA is smaller for 2025.

When you apply the 2.5% COLA to the average $1,925.46 check, the average retiree will see a $48.14 benefits increase. So, the average senior will get around $577.68 more per year in 2025 from Social Security compared with the amount they received in 2024.

The increase isn’t exactly this amount because the benefits formula actually goes back and applies your COLA to your standard benefit and then applies any early filing penalties and delayed retirement credits that may have affected your benefit. Still, it’s a pretty close estimation of how much more seniors can expect to collect this year.

Don’t forget the impact of Medicare premium increases

Although the average retiree is getting about a $48 raise, the reality is that most people aren’t going to see their payments increase by a full 2.5%. That’s because the 2025 raise will be offset by rising Medicare premiums.

Medicare Part B premiums are withdrawn from Social Security benefits for most retirees, and the standard monthly premium increased by $10.30 in 2025, according to the Centers for Medicare and Medicaid Services.  Premiums for Part B will now be $185.00 up from $174.70 in 2024.

For a retiree on track to get a $48.14 raise this year, losing $10.30 to extra Medicare premiums is going to mean that Social Security payments only increase by $37.84 per month.

Other retirees who receive more or less than the standard benefit can also estimate how big their increase should be by calculating 2.5% of their 2024 benefits and subtracting $10.30 from that amount.

Of course, it’s worth noting that while seniors are getting more money, this isn’t like a traditional raise that an employer provides that may increase buying power over time. COLAs are meant to help benefits keep pace with inflation so your added payments won’t necessarily buy you more but will instead simply help to ensure that you don’t lose ground.

So, don’t count on your Social Security stretching much further this year than they did before.