With inflation on everyone’s mind, many retirees are eager to know how much their Social Security benefits will increase next year.
The Social Security Administration (SSA) will announce the official cost-of-living adjustment (COLA) for 2025 soon, following the release of inflation data by the U.S. Labor Department.
This adjustment is designed to protect the purchasing power of Social Security benefits by aligning them with rising prices.
In 2025, retirees aged 70 are expected to receive the largest nominal-dollar increases, although all Social Security beneficiaries will see a raise. Here’s why age 70 stands out and how COLA works in practice.
COLA Explained
The COLA is an annual adjustment to Social Security benefits based on inflation. This helps ensure that retirees maintain the same purchasing power despite rising prices.
The nonprofit advocacy group Senior Citizens League (TSCL) predicts that the COLA for 2025 will be about 2.5%. While this is a smaller increase compared to the past four years, it will still provide extra income to help retirees keep up with inflation.
For context, 63% of adults reported that inflation had caused financial hardship in 2024, making this adjustment crucial for many retirees.
Age Matters: Why Retirees at 70 Will Benefit Most
Retirees at age 70 typically get the largest Social Security benefits, which means they will also receive the biggest nominal-dollar COLA increases.
The average monthly benefit for a retired worker in September 2024 was $1,920, and with a 2.5% COLA, this would increase by $48. However, retirees who currently receive higher-than-average benefits will see even larger increases.
For example, the average benefit for a 70-year-old is estimated to be $2,068 per month. With a 2.5% COLA, these retirees would see their benefits rise by about $51.70 per month in 2025. This is more than retirees in younger age groups or those with lower benefits.
Here’s a quick look at how this would work:
| Age (2024) | Average Monthly Benefit | COLA Increase (2.5%) |
|---|---|---|
| 62 | $1,608 | $40.20 |
| 65 | $1,850 | $46.25 |
| 70 | $2,068 | $51.70 |
| 75 | $1,924 | $48.10 |
| 80 | $1,755 | $43.88 |
As seen in the table, the size of the COLA increase grows with higher base benefits, which retirees at age 70 typically enjoy.
Why Do 70-Year-Old Retirees Receive the Most?
The reason behind larger benefits for 70-year-olds lies in how Social Security payments are calculated. The SSA determines benefits using two key factors: lifetime earnings and claiming age.
- Lifetime Income: The SSA calculates your Primary Insurance Amount (PIA) based on your 35 highest-earning years. This ensures that higher lifetime earnings result in larger monthly benefits.
- Claiming Age: The age you start claiming benefits significantly impacts the size of your monthly payments. If you claim before your full retirement age, your benefits will be reduced. However, if you delay claiming until age 70, you receive more than 100% of your PIA, resulting in larger payments. But there is no further benefit to delaying beyond 70.
Most retirees claim benefits before 70, but for those who wait, the reward is larger monthly checks, thanks to delayed retirement credits.
Beyond age 70, the only factor that increases benefits is the annual COLA, since working longer or waiting further doesn’t change the payout.
The Impact of COLA for New vs. Existing Retirees
Another interesting trend is that new retirees tend to see faster increases in benefits compared to older recipients. This is because wages usually grow faster than inflation, meaning new retirees are starting with a higher baseline benefit.
However, after age 70, inflation becomes the only variable impacting benefits, which is why 70-year-old retirees tend to receive the largest increases in nominal dollars.
So while COLA applies equally to all Social Security recipients, the impact on your actual monthly income depends on your base benefit, and older retirees—particularly those at age 70—stand to gain the most in 2025.
Retirees at other ages will still receive a boost in their monthly checks, but no group will benefit more in nominal dollars than those turning 70 next year.
As the official COLA announcement approaches, understanding how these adjustments work can help retirees prepare for changes to their income in the coming year.
FAQs
How much will Social Security increase in 2025?
The COLA is expected to be 2.5%, based on inflation estimates.
Who will get the biggest Social Security COLA in 2025?
Retirees aged 70 will likely get the largest increases in nominal dollars.
What is the average Social Security benefit at age 70?
The average benefit for a 70-year-old is approximately $2,068 per month.
Does delaying Social Security after age 70 increase benefits?
No, delaying after age 70 does not increase benefits further.
Why does inflation impact Social Security benefits?
COLAs adjust benefits to maintain purchasing power in response to inflation.
