After months of speculation, the Social Security Administration has finally announced the 2025 cost of living adjustment (COLA). She will add this COLA to your checks starting with your December 2024 benefit, which you will receive in January 2025.

The COLA is the smallest we have seen since 2021. Many expected this after inflation cooled, but it’s still disappointing for those who have been struggling to make ends meet on their Social Security checks for some time.

However, COLAs are percentages and not a flat dollar value. Everyone will see their Social Security checks increase by different amounts. Calculating your own COLA increase isn’t too difficult, but if you want a quick overview of what you’ll receive next year, looking at the averages can be helpful.

Social Security recipients will get 2.5% more next year

The 2025 Social Security COLA was 2.5%. This is in line with estimates from the Senior Citizens League (TSCL), a non-partisan seniors group, last month.

This represents the lowest COLA since beneficiaries received a 1.3% increase in 2021. However, it is fairly close to the 20-year average of 2.6%. Here’s a closer look at the difference it will make to beneficiaries’ average checks next year:

Data source: Social Security Administration. All benefit amounts were rounded to the nearest dollar.

Keep in mind that these are just averages. If your current checks are larger than the 2024 benefit listed in the table above, you will receive a larger average increase.

The actual formula for calculating your 2025 Social Security benefit is a bit complex, but you can get a pretty good approximation of your benefit next year by adding 2.5% to your current checks. You might be off by a dollar or two, but it should be pretty accurate.

The Social Security Administration will mail you a personalized COLA notice in December with your exact 2025 benefit amount. You may also be able to access this notice through your My Social Security account in early December, if you have one.

The story continues

What to do now

Now that you have a general idea of ​​what your 2025 Social Security checks will look like, you can start planning your budget for next year. But before you do that, you might want to consider whether you’ll still have to pay Social Security taxes next year.

This is a federal tax that Social Security recipients pay if their provisional income – adjusted gross income (AGI), plus any nontaxable interest on their investments and half of their annual Social Security benefit – is $25,000 for a single adult or $32,000. Dollars for a married person exceeds couple. It may cause you to pay ordinary income tax on up to 85% of your Social Security checks.

Donald Trump wants to eliminate this tax, but there is no guarantee that this would happen even if he were elected in November. It is better to plan for tax liability if you think your provisional income will be high enough. You can reserve the funds for taxes yourself and pay them out at the end of the year if necessary. Or you can fill out Form W-4V and request that the IRS withhold a portion of each of your checks in advance for taxes. Any excess money withheld throughout the year will be returned to you as a tax refund when you file your tax return.

Keep in mind that nine states still also tax some seniors’ Social Security benefits. If you live in one of these areas, you should also consider whether the increase you receive from the 2025 COLA could affect your likelihood of owing these taxes. If so, include these expenses in your 2025 budget so you aren’t caught off guard when you file your taxes.

The $22,924 The Social Security bonus is completely overlooked by most retirees

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a few little-known “Social Security secrets” could help boost your retirement income. For example: A simple trick could earn you up to $22,924 more… every year! Once you learn how to maximize your Social Security benefits, I think you’ll be able to retire confidently with the security we’re all looking for. Just click here to learn how you can learn more about these strategies.

Check out “Social Security Secrets” »

The Motley Fool has a disclosure policy.

The 2025 Social Security Cost of Living Adjustment (COLA) has been announced. Here’s exactly how much it will boost average benefits. It was originally published by The Motley Fool