Social Security COLA
On October 10, 2024, the government will reveal the Social Security Cost-of-Living Adjustment for 2025-this is a date that will shape the lives of over 69 million Americans using Social Security benefits. “This year’s COLA is not going to be big relative to years in the past, but it means two important things to you”
How COLA Affects Your Monthly Benefits
The Senior Citizens League puts forward its projections that the COLA for the year 2025 will come in at 2.5 percent. Compared to the 3.2 percent lift in the 2024 COLA, this is relatively pale. For instance, if you have a monthly benefit of $2,000, adding 2.5 percent of the COLA onto this will increase your checks to $2,050.
The Social Security Administration will send out individualized COLA notices in December to those who may wish not to perform their own math work, otherwise, they can find out by logging into their My Social Security portal.
Be Aware of Tax Implications
A COLA increase can put some or all of your Social Security benefits in the taxable column. If your “provisional income” — that is, your adjusted gross income, plus half your Social Security benefits — exceeds $25,000 for a single filer or $32,000 for a married couple, you could find yourself paying income tax on as much as 85 percent of your benefits. The dollar thresholds aren’t adjusted for inflation, so a COLA increase could push even more seniors into taxable brackets.
And some states also tax Social Security benefits, so there’s another twist in the mix. Consulting a tax professional might help you cut through these changes.
Planning Ahead for 2025
Of course, this predicted COLA is not as rich as some may have hoped for, but budget your 2025 based on these predictions. Start by calculating your actual new monthly benefit and factor in possible taxes imposed. You will know those adjustments to yield more control over your finances for next year.
Keep those ears open as we count down the last few days until the Official COLA announcement on October 10.
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