Social Security Benefits for Retirees – Average Increase Set to Change This Fall

Social Security checks provide a crucial source of income for around 72.5 million Americans. The majority of recipients, roughly 65 million, rely solely on Social Security benefits, while others receive Supplemental Security Income (SSI) or a combination of both. Each monthly payment helps lift millions of elderly and disabled individuals out of poverty. However, the amounts vary month to month due to administrative factors and new enrollees, with the average check based on recipients’ past earnings and the age they start claiming benefits.

Payments

Social Security payments tend to be stable, but recent months have seen significant fluctuations. Let’s take a look at the average monthly payments for Social Security and SSI recipients over the last few months:

• May 2024: $1,917
• June 2024: $1,781.07
• July 2024: $2,507

The sharp increase in July was due to an unusual administrative glitch where June payments were delayed into early July. This delay artificially inflated the average July payment, but such fluctuations are rare.

In general, the average payment this fall is expected to return to a more typical range, estimated at around $2,068.33 based on the three-month average. However, as the SSA does not predict monthly averages, future payments could vary slightly. It’s important to remember that your 2024 payment will remain unchanged unless there are significant administrative issues, with adjustments expected in 2025.

COLA

A key factor that influences Social Security payments is the Cost of Living Adjustment (COLA). Since the 1970s, the SSA has used Consumer Price Index (CPI) data to determine COLA, which aims to help beneficiaries keep pace with inflation. For instance:

• 2022 COLA: Increased by 5.9%
• 2023 COLA: Surged to 8.7%, the largest jump in four decades due to high inflation
• 2024 COLA: A more modest rise of 3.2% as inflation eased

As inflation continues to decrease—falling below 3%—the SSA will likely offer a smaller COLA in 2025. This is a mixed blessing for retirees: while a lower COLA reflects slower price increases, it also means Social Security checks will rise more modestly. Early predictions suggest a 2.57% COLA for 2025, down from a previous estimate of 2.63%, though the final figure will be announced later in the year.

Inflation’s Impact

The recent decline in inflation is good news for those on fixed incomes, as prices aren’t rising as quickly. The Federal Reserve’s goal of bringing inflation down to 2% seems to be within reach. But lower inflation also means smaller COLA increases, reducing the amount beneficiaries receive in 2025. Retirees should prepare for a more modest increase next year compared to the high COLA hikes seen in recent years.

Example

If a retiree receives $2,068 per month in 2024, a 2.57% COLA would increase their monthly payment by about $53, bringing it to around $2,121 in 2025. While this increase may help offset rising costs, it won’t be as substantial as previous adjustments.

Future Changes

While the SSA calculates COLA based on inflation rates, retirees should keep an eye on broader economic trends to anticipate changes in their payments. Although the exact COLA won’t be announced until the end of the year, early estimates are useful for financial planning. It’s also important to know that unexpected administrative factors, like those seen this summer, can sometimes cause short-term fluctuations in payment amounts.

Beneficiaries should also be mindful of state tax laws, as some states impose taxes on Social Security income, which can reduce the overall amount received. Knowing these factors can help retirees better manage their finances and plan for the future.

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