Social Security is a vital program that serves more than 71 million Americans, providing crucial financial support to a diverse group of individuals, including retirees, veterans, and dependents. The amount of benefits that an individual receives is primarily determined by their earnings history during their working years and the type of program they are enrolled in.
To ensure these benefits retain their value despite inflation, Congress passed legislation in 1973 that introduced annual cost-of-living adjustments (COLA). The first of these adjustments was implemented in 1975, but the percentage increase for COLA fluctuates yearly depending on economic conditions. For the year 2024, the COLA was set at 3.2%. Looking ahead to 2025, preliminary projections suggest that the COLA will be close to 2.57%.
According to an analysis from the Detroit Free Press, this adjustment would translate to an approximate increase of $50 per month for beneficiaries, depending on the amount they are currently receiving. However, this increase may not be sufficient to keep up with the rising expenses that older adults face. According to the Senior Citizens League's 2024 “Loss of Buying Power” study, retirees would need an additional $370 per month to maintain the same purchasing power they had back in 2010, which is nowhere close to the potential increase they are in for.
Additionally, it is important to note that this estimate does not take into account potential hikes in Medicare Part B premiums, which are likely to happen as well and which could further impact retirees’ financial situations. The amount of retirement Social Security benefits an individual receives varies depending on several factors, such as the number of years they worked, the total amount of Social Security taxes they paid, and the age at which they chose to retire.
On average, retired workers receive about $1,907 per month, and for couples who file jointly, the average monthly benefit is approximately $3,303, but the maximums are much higher than this average figure. Those receiving survivor benefits, which are paid to the spouses and children of deceased workers, get an average of $1,509.50 per month while spouses of retired workers typically receive around $910 each month.
Children of retired workers average $892.39 per month in benefits. In addition to the Social Security program, there are also Supplemental Security Income (SSI) benefits, which are designed to assist individuals who have very limited income and resources, are 65 years old, or have a disability or blindness. On average, individual SSI beneficiaries receive around $943 per month, while couples who qualify for SSI receive approximately $1,415 per month.
Since benefits vary so much from person to person and are very circumstantial, calculating how much you could be entitled to receive on your own can be tough. For those looking to estimate their future Social Security benefits, several resources are available. The Social Security Administration offers a benefits quick calculator that can help individuals project their potential payments. Additionally, the North State Bank provides an inflation adjustment calculator that can be used to adjust these projections for expected inflation rates.
As we approach 2025, the anticipated COLA increase of 2.57% serves as a reminder of the ongoing challenges faced by Social Security beneficiaries in maintaining their purchasing power amidst rising costs. While the annual COLA adjustments are intended to help offset inflation, many retirees and other beneficiaries may find that these increases do not fully keep pace with the actual cost of living, particularly when factoring in potential increases in healthcare expenses and other necessities. Knowing the benefits they are entitled to, as well as the amount they will receive, could help alleviate the economic burden.
