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The Social Security Administration (SSA) announced Social Security and Medicare changes for 2025, including a 2.5% cost-of-living adjustment (COLA) for Social Security benefits and increases in Medicare premiums and deductibles. These changes help recipients manage their expenses in the face of inflation and healthcare cost increases.
This modest increase aligns with the 10-year average COLA of 2.6%, although it’s slightly lower than the 3.2% adjustment seen in 2024.
Additional Social Security Updates
- SSI Payments: Nearly 7.5 million Supplemental Security Income (SSI) recipients will see a 2.5% increase in their payments beginning December 31, 2024. SSI, which provides financial assistance to low-income individuals who are aged, blind, or disabled, will receive the same COLA adjustment as Social Security benefits to help keep pace with inflation.
- Taxable Earnings Cap: The maximum earnings subject to Social Security tax will increase from $168,600 to $176,100 in 2025. This increase is tied to the national average wage index, which reflects growth in overall wages across the economy. By adjusting the taxable maximum annually, Social Security ensures that higher earnings are taxed appropriately to maintain the program’s funding. This taxable earnings cap is also a potential area where Social Security’s long-term sustainability could be addressed. Policymakers have proposed raising or even eliminating the cap as a way to increase revenue and bolster the program’s solvency.
Medicare Premiums and Deductibles
Meanwhile, the Centers for Medicare & Medicaid Services (CMS) has announced new Medicare costs for 2025:
- Part A Costs:
- Most beneficiaries still pay $0 for the Part A premium.
- The Part A deductible rises to $1,676 (+$44).
- Coinsurance for hospital stays (days 61–90) will increase to $419 per day (+$11).
- Skilled nursing facility coinsurance (days 21–100) will be $209.50 per day (+$5.50).
- Part B Premium: The standard monthly premium will rise by $10.30 to $185.
- Part B Deductible: Up by $17, increasing to $257.
- Part D Premiums: Medicare Part D premiums may also increase in 2025. Costs vary depending on the specific plan, so check with your provider for updates.
The Net Impact on Your Budget
For most beneficiaries, the COLA increase will more than offset the higher Medicare costs. If I had a nickel for every time someone told me that Medicare increases completely erase the Social Security COLA, I’d be a rich man!
While the percentage increases for Medicare Part B—and potentially Part D—might be higher than the COLA for Social Security, they’re applied to much smaller numbers. This year, the $50 average monthly COLA increase far exceeds the $10.30 rise in the standard Part B premium, leaving many recipients with a net gain even after factoring in a possible bump in Part D premiums.
Keep in mind, individuals subject to income-related monthly adjustment amounts (IRMAA) for Medicare Parts B and D may see higher premium increases, which could offset some of the COLA benefit.
Other Minor Updates for 2025
- Simplified COLA Notices: For the first time, SSA will issue one-page, plain-language COLA notices with personalized details, available online through my Social Security accounts starting in early December.
- Medicare Benefit Amounts: These will be viewable via my Social Security or mailed notices starting in late November for those enrolled in Medicare.
What All of This Means for You
The 2025 adjustments reflect efforts to balance inflationary pressures with healthcare cost trends. While Medicare costs are rising, most Social Security recipients will see a net increase in their benefits.
To view your updated benefit notice online, consider setting up a my Social Security account at SSA.gov ↗.
For more information about Social Security, check out these blogs on Raining Pennies:
- The Social Security Break-Even Calculator You Need
- Maximize Social Security by Switching Spousal and Individual Plans