Retired workers with above-average benefits will receive above-average COLAs next year.
The Social Security program undergoes several changes each year to ensure benefits keep pace with rising prices and wages. The most anticipated of those changes is the cost-of-living adjustment (COLA), which essentially reimburses retired workers for the previous year’s inflation.
The Social Security Administration will announce the official COLA for 2025 on Thursday, Oct. 10, shortly after the Labor Department releases Consumer Price Index data for the month of September. However, The Senior Citizens League (TSCL), a nonpartisan senior advocacy group, estimates benefits will increase 2.5% next year.
All retired-worker benefits will increase by the same percentage, but COLAs will differ in terms of nominal dollars, and age is a good predictor of which retirees will receive above-average COLAs. Read on to learn more.
Image source: Getty Images.
The average Social Security benefit for retired workers ages 62 to 70
Social Security benefits for retired workers depends on lifetime earnings and claiming age. First, income is adjusted for wage-inflation and run through a formula to find the primary insurance amount (PIA), which is the monthly benefit a worker will get if they claim Social Security at full retirement age (FRA).
Next, the PIA is adjusted based on claiming age. Workers are eligible for retirement benefits at age 62, but anyone that starts Social Security before FRA is penalized with a smaller benefit, meaning they receive less than 100% of their PIA. And anyone that claims Social Security after FRA is rewarded with a larger benefit, meaning they receive more than 100% of their PIA. There is no advantage to claiming later than age 70.
As a result, the average retired-worker benefit generally increases between ages 62 through 70, as shown in the chart below. The data comes from a biannual report last updated by the Social Security Administration in June 2024.
|
Age |
Average Retired-Worker Benefit |
|---|---|
|
62 |
$1,311 |
|
63 |
$1,344 |
|
64 |
$1,436 |
|
65 |
$1,583 |
|
66 |
$1,774 |
|
67 |
$1,894 |
|
68 |
$1,947 |
|
69 |
$1,972 |
|
70 |
$2,068 |
Source: Social Security Administration. Shown above is the average retired-worker benefit in June 2024. Payment amounts have been rounded to the nearest dollar.
Retired workers at age 70 will get the largest nominal-dollar COLAs in 2025
In June 2024, the average retired worker received $1,918 from Social Security. Should benefits receive a 2.5% cost-of-living adjustment (COLA) in 2025, that figure would increase about $48 to $1,966 per month next year.
As mentioned, all retired workers will receive the exact same COLA in terms of percentage points. But retired workers with larger benefits will receive larger nominal-dollar COLAs, and retired workers with smaller benefits will receive smaller nominal-dollar COLAs. In other words, retirees with Social Security benefits exceeding $1,918 per month can expect an above-average pay increase next year.
We can also estimate the average nominal-dollar COLA for retired workers aged 62 to 70 using the data from the previous section.
|
Age |
Average Benefit (Before COLA) |
Average Benefit (After COLA) |
Additional Monthly Income |
|---|---|---|---|
|
62 |
$1,311 |
$1,344 |
$33 |
|
63 |
$1,344 |
$1,378 |
$34 |
|
64 |
$1,436 |
$1,472 |
$36 |
|
65 |
$1,583 |
$1,622 |
$40 |
|
66 |
$1,774 |
$1,818 |
$44 |
|
67 |
$1,894 |
$1,914 |
$47 |
|
68 |
$1,947 |
$1,996 |
$49 |
|
69 |
$1,972 |
$2,021 |
$49 |
|
70 |
$2,068 |
$2,120 |
$52 |
Source: Social Security Administration. Shown above the hypothetical average benefit for retired workers based on a 2.5% COLA in 2025. Payment amounts have been rounded to the nearest dollar.
As shown above, among the charted groups, retired workers at age 70 (in June 2024) will get the largest nominal-dollar COLAs in 2025 simply because they already have the largest baseline payouts. Meanwhile, retired workers at age 62 (in June 2024) will get the smallest nominal-dollar COLAs because they have the smallest baseline payouts.
The lesson here is that delaying Social Security benefits can be a very rewarding decision. Roughly one-quarter of new retirees claim Social Security at age 62 in any given year, but statistics show most of those people are shortchanging themselves. Indeed, as my colleague Katie Brockman discusses, the median worker aged 45 to 62 would boost their lifetime benefit income by $225,944 if they delayed Social Security until age 70.
In this case, assuming benefits get a 2.5% COLA next year, the average 70-year-old retiree will receive about $2,120 per month in 2025, which equates to $25,440 for the full year. Meanwhile, the average 62-year-old retiree will receive about $1,344 per month in 2025, which equates to $16,128 for the full year. The difference between those figures exceeds $9,000.
