Social Security Adjustment 2025: What You Should Know

The Ministry of Social Affairs will announce the cost-of-living adjustment (COLA) for Social Security for the year 2025 on October 10, 2024. Although no significant increase compared to recent years is expected for 2025, this adjustment remains of great importance to all those who rely on Social Security payments. Once the COLA is announced, it is important to get an overview of its impact on your finances. COLAs are based on percentage figures – for example, the COLA for 2024 was 3.2%. If the COLA for 2025 is indeed at the projected 2.5%, this would mean an increase of $50 per month for a current monthly benefit of $2,000, resulting in a total of $2,050 per month. For those who do not wish to make their own calculations, the Social Security Administration will send a personalized notification in December with the exact benefit amount for 2025. Additionally, it may be possible to view this information in advance through a "my Social Security" account. Another important point concerns the taxation of Social Security benefits. Certain seniors may need to tax their benefits, depending on their "provisional income," which is calculated as adjusted gross income plus non-taxable interest and half of the annual Social Security benefits. Since these thresholds are not adjusted for inflation, a larger number of seniors could become taxable in the future, potentially leading to unpleasant surprises during tax filing. Seniors should also consider that nine states tax Social Security benefits. Having precise knowledge of whether and how much must be remitted to the state can be crucial. Upon receiving the COLA notification, it is advisable to begin budget planning for 2025. Besides Social Security, other income sources such as earned income or personal savings may be necessary to cover remaining expenses. Experts point out that COLAs do not always suffice to keep up with inflation, but only a legislative change could rectify this. Prompt planning immediately after the announcement of the COLA for 2025 offers the best opportunity to evaluate and, if necessary, adjust one's financial budget for the coming year.