Retired workers with above-average benefits will receive an above-average COLA next year.
The Social Security program undergoes several changes each year to ensure that benefits keep pace with rising prices and wages. The most anticipated of these changes is the cost of living adjustment (COLA), which essentially reimburses retired workers for the previous year’s inflation.
The Social Security Administration is scheduled to release the official COLA for 2025 on Thursday, October 10, shortly after the Department of Labor releases September Consumer Price Index data. However, the Nonpartisan Seniors Advocacy Group, Senior Citizens Alliance (TSCL), predicts that benefits will increase by 2.5% next year.
All retired worker benefits increase at the same rate, but COLAs vary in nominal amounts, and age predicts which retirees will receive above-average COLAs. Read on to learn more.
Image source: Getty Images.
Average Social Security Benefits for Retired Workers Ages 62 to 70
Social Security benefits for retired workers vary based on lifetime earnings and claim age. First, your income is adjusted for wage inflation and a formula is used to determine your Principal Insurance Amount (PIA). This is the amount of monthly benefits a worker would receive if they claimed Social Security at Full Retirement Age (FRA).
The PIA is then adjusted based on your claim age. Workers are eligible for retirement benefits at age 62, but those who start Social Security before FRA are penalized with reduced benefits. This means you will receive less than 100% PIA. And anyone who claims Social Security after FRA will receive larger benefits. This means you will receive more than 100% of your PIA. There is no benefit to applying if you are over 70 years old.
As a result, average benefits for retired workers generally increase between ages 62 and 70, as shown in the chart below. This data is based on the Social Security Administration’s biannual reports, which were last updated in June 2024.
year
Average benefits for retired workers
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 are average retired worker benefits for June 2024. Payment amounts are rounded to the nearest dollar.
Workers who retire at age 70 will receive the maximum COLA in nominal dollars in 2025
In June 2024, the average retired worker received $1,918 from Social Security. If your benefit is subject to a 2.5% cost-of-living adjustment (COLA) in 2025, that amount will increase by about $48 per month next year to $1,966.
As mentioned earlier, all retired workers receive the exact same COLA in percentage points. However, retired workers who received more benefits would receive a larger nominal dollar COLA, and retired workers who received fewer benefits would receive a smaller nominal dollar COLA. In other words, retirees receiving more than $1,918 per month in Social Security benefits can expect an above-average salary increase next year.
You can also use the data from the previous section to estimate the average nominal dollar COLA for retired workers between ages 62 and 70.
year
Average profit (before COLA)
Average profit (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 are rounded to the nearest dollar.
As shown above, among the group in the graph, workers who retire at age 70 (June 2024) will be paid in nominal dollars in 2025 simply because they already have the largest base payout. You will receive the maximum COLA. On the other hand, retired workers at age 62 (June 2024) have the lowest base pay and therefore the lowest nominal dollar COLA.
The lesson here is that deferring Social Security benefits can be a very beneficial decision. Each year, about a quarter of new retirees claim Social Security at age 62, but statistics show that most of these people are underfunded. In fact, as my colleague Katie Brockman discusses, the median worker between the ages of 45 and 62 would have a lifetime benefit income of 225,944 if they delayed enrolling in Social Security until age 70. This will result in an increase in dollars.
In this case, assuming a 2.5% COLA is applied to next year’s benefits, the average 70-year-old retiree would receive approximately $2,120 per month in 2025, which equates to $25,440 per year. I will. 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 these numbers is more than $9,000.