On September 25, 2024, shoppers in San Anselmo, California, passed by rows of fresh eggs on display at a local grocery store while going about their daily routines. This simple act of shopping serves as a backdrop for the financial update that many retirees have eagerly awaited: the new Social Security benefit checks for 2025, which reflect a modest 2.5% cost-of-living adjustment (COLA). This adjustment marks the smallest annual increase since 2021 and translates to roughly an extra $50 each month for retirees, based on the Social Security Administration’s figures.
Despite this increase, many retirees are finding that it barely makes a dent in the rising costs of everyday necessities, driven by persistent inflation. Jim Blair, who founded NSSA Professionals and has extensive experience as a Social Security administrator, acknowledges that while any raise is appreciated, it doesn’t quite keep up with current economic realities. Nonetheless, as Blair points out, "It’s not necessarily keeping up with everything, but it’s better than nothing."
Recent government data shows that the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which determines the annual Social Security COLA, rose by 2.8% over the past year up to December. Similarly, the Federal Reserve’s measure of long-term inflation, which excludes volatile food and energy prices and uses the personal consumption expenditures price index, also reported a 2.8% rise for December.
For retirees looking to increase their Social Security benefits, there are strategies to consider. Blair suggests a couple of tactics that might help enhance those checks.
Consider Adjusting Your Tax Withholdings
For Social Security recipients, up to 22% of benefits can be withheld for taxes. "If you’re finding it tough to make ends meet and aren’t in a high tax bracket, it’s possible to adjust this amount," advises Blair. By tweaking withholdings, individuals might see more immediate funds, although it could mean smaller refunds next tax season. This move carries the risk of owing at tax time, contingent on one’s financial situation. Those interested should submit Form W-4V to the Social Security Administration to revise their withholdings.
Request a Medicare Premium Adjustment
Most retirees are familiar with the standard monthly Medicare Part B premium, which covers essential medical services and equipment, set at $185 for 2025. However, those with higher incomes face additional costs known as the income-related monthly adjustment amount (IRMAA). This also impacts Medicare Part D prescription drug plans, which average $46.50 monthly in 2025.
Premiums are typically calculated using income tax data from two years prior. However, if significant life changes, like retirement, selling a business, or losing a spouse, have since lowered your income, you may qualify for an adjustment. To pursue this, fill out Form SSA-44 and send it to the Social Security Administration.
These adjustments can potentially ease financial strain for those who find their benefits insufficient, especially in a challenging economic climate.
