All Social Security recipients will get a 2.5% cost of living adjustment (COLA) next year — or at least on paper. This increases monthly benefit amounts for all recipients, including those eligible for spousal Social Security.

At the same time, spending on pensioners is expected to increase in 2025. This probably won’t eat up your entire COLA, but it may leave you with less money to spend than expected.

Image source: Getty Images.

Medicare Part B premiums will rise next year

Seniors on Medicare will pay a monthly premium of $174.70 for Part B insurance in 2024. Next year we will see an increase to $185.00 – an increase of $10.30. If you are not yet eligible for social security, you will pay this premium out of your own pocket, just like with any private health insurance.

Once you start receiving Social Security, your Part B premiums will generally be deducted from your monthly benefit checks. You can decline this, but you will then have to pay this bill separately each month. It’s often more convenient to simply have the premium withdrawn from your checks so you don’t have to remember to pay it yourself.

This means that the Social Security benefit you actually receive will be less than your stated monthly benefit. For example, the average monthly Social Security benefit is expected to increase by $49 to $1,976 in 2025. However, if you withheld Medicare Part B premiums, you’ll actually only get $38.70 more per month next year, and you’ll only have $1,791 left to cover your other expenses after withholding .

High earners could lose even more of their Social Security benefits because Medicare charges higher Part B premiums to seniors with incomes above certain thresholds, as shown in the table below.

Data source: Center for Medicare & Medicaid Services.

These people are likely accustomed to paying higher Part B premiums because of their high incomes, but may still need to adjust their budgets a bit to account for higher Medicare costs next year.

Start planning for 2025

The impact of higher Medicare Part B premiums on your Social Security benefit is noticeable because it is deducted directly from your checks. But that’s not the only cost increase next year. Other aspects of Medicare, including Part A deductibles and copayments and Part B deductibles, are also increasing.

Everyday expenses such as food, accommodation, utilities and transport also need to be managed. These have also increased due to inflation. Although the cost of goods is no longer rising as quickly as it was a few years ago, even a small increase can take a toll on retirees, especially those who don’t have sufficient personal savings to supplement their Social Security checks. That’s why it’s important to have a budget through 2025 so you understand how far your checks will go and how much you’ll need to cover with income from other sources.

If you haven’t already, you should receive a personalized COLA notice from the Social Security Administration sometime this month detailing your exact Social Security benefit for 2025. You can also access it through your Message Center if you have a My Social Security account.

Try to come up with a plan to cover what Social Security doesn’t cover next year. This may mean cutting back on your spending or perhaps even taking on a part-time job to increase your disposable income. If this isn’t an option, see if you’re eligible for other government benefits like Supplemental Security Income (SSI) to help you make ends meet.