Social Security COLA up 2.5% for 2025... but Medicare Part B Projected to Jump 5.9%!

Peter, good to see you.

Welcome back, everyone. We have some big news for Social Security. The COLA is up 2.5% for 2025, but Medicare Part B is projected to jump 5.9%. So this cost of living adjustment reflects a steady decline in inflation. However, again, experts predict we will be paying almost 6% more for Medicare Part B.

So let's break it all down. The 2.5% increase, though, means that most retirees' monthly payments will increase by about $50 to $1,976 a month starting in January. Does the COLA affect when we should be claiming our benefits?

Not really. As far as that direct question, no, not really, because the COLA will occur whether you have claimed or not. So that is an across-the-board, across-the-Social-Security system. I mean, even a 50-year-old who is years away from claiming, their benefits will increase respectively to that COLA adjustment. And of course, as you wait between the actual claiming ages of 62 and 70, your benefit goes up each year you wait and delay, regardless even if there was zero COLA. So the answer is claim it when you need an income, right? There's kind of two schools of thought.

The building's on fire, get it while the getting's good. The day you turn 62, rush out and claim and collect. Or you max out your benefit at 70, wait all the way until 70 so you have the highest lifetime amount. And I think there's a little bit of a kernel of truth in both of those, but the real answer for a individual person or a married couple is probably not universally. I know it's not universally, either one of those.

It is very situational specific. You've got to look at your numbers. And I really have a pretty strong feeling that the real answer is take it when you need an income. And if it's just a kind of a, we need some money, a one-off thing, maybe don't rush out and claim Social Security to solve that issue.

But if it's a month in, month out from here until the foreseeable future, we are going to need an additional income. Social Security is the source for that because you want to use Social Security as a tool to protect your personal assets. If you need extra money, you can reach into your personal assets and pull it out of there. If you pass away early, your personal assets will pass on to your beneficiaries. Those things don't happen from Social Security.

So use Social Security to protect those personal assets. And I do want to kind of take issue with the decline in inflation. If we had a decline in prices, then we would not see a COLA, right? So just because we hear the term decline in inflation, we're still getting a positive COLA because things still cost more. It's just that inflation has slowed down its rate. It's not that we don't have inflation.

We do not have deflation. It's the rate of the increase in these prices going up has slowed, but they are still going up. And hence, that's why we have the cost of living adjustment, which by the way, does not ever fully account for inflation because Social Security generally is not all of somebody's income. So only the portion that is Social Security will get that increase. And Social Security COLAs generally don't truly reflect the cost of living on things as is seen by the not equivalent reflective increase with the Medicare premiums.

Right. So now let's talk about that for a second because Medicare 2024 Medicare Part B premium projected to be $185 a month. That is up from $174.70. This premium usually comes straight out of your Social Security check. So how do we prepare for those changes?

Yeah, twenty twenty five. That's going to be next year's projected number going up. And I mean basically just be aware that Social Security is going to be a little more and therefore the Medicare premiums are also going to be a little more. But the increase in Social Security is generally going to be larger than the increase in Medicare premiums. So you're still actually probably going to net more in your check as long as you are sixty five or above and claiming Social Security where the Medicare premium increase is going to be kind of a factor that you actually have to personally physically account for is if you are claiming, collecting, I'm sorry, if you are not claiming and collecting Social Security yet, but already have claimed and are on your Medicare and have a Medicare Part B and Part D, that's where prices are going to go up, that you're going to have to account for out of pocket. Otherwise, they're just going to deduct it from your Social Security automatically. And even though it's a larger percentage increase on the Medicare premium, again, where Social Security's COLAs don't actually accurately reflect inflation, but because the Social Security is a larger number, a smaller percentage increase still will more than offset the dollar value increase on the Medicare premiums. Right. So how will this COLA affect the taxes we pay on our Social Security benefit?

There are a couple things. I mean, it's not going to be a whole, whole lot of people, but this increase alone may push some collectors, some Social Security recipients over certain thresholds where the Social Security either becomes taxable or becomes even more taxable. So we've got the equation for your provisional income, which basically includes everything, including half of the Social Security itself. And even if Social Security was all of your income and your only source of income, if you've got enough of it and the increase in Social Security pushes you over one of those thresholds, and I'm sorry, I went backwards here in the explanation and the visuals, but if it pushes you over one of those thresholds for either a married couple filing jointly or a single individual, which those thresholds are pretty low, actually. So if that increase, the COLA pushes you over one of those, suddenly your Social Security may become taxable when it was not before or may reach a tier where more of it becomes taxable. So that's where we're really going to have to factor in.

Does the COLA actually, yes, it increases the income, gross, but does it have some potential unexpected negative consequences on the taxability of the rest of your income where you might actually receive less net as a result of those tax thresholds? And that's a really unpleasant surprise for the few, the small group that that does happen to. 75% of people, 50 plus worry Social Security will run out of funding in their lifetime and 61% say it's a major source of their retirement income. How do we prepare for the inevitable changes that will have to happen for the program to remain solvent? That 61% should be a much lower number. And it's always going to be a major component or it should be. I mean, they've taken our money, they've held it for us in trust, and then they pay it back to us. But Social Security was always intended to be an anti-poverty measure. So we need to have less people who are jeopardizing being in poverty in retirement and to have 61% of people relying on it as a major or in some cases, the only source of income. I know that it sounds kind of privileged to say this, but we need to save more. And I know that life is expensive and we've got to pay for things as they come up throughout our lifetime, but it's got to be an emphasis point in our financial wellbeing that we are going to end up being self-sufficient for establishing our quality of life in retirement. And it needs to be a priority.

It needs to be one of the first bills that we pay that we are saving and investing something for our future selves so that we are not risking being impoverished in retirement, especially when the government has proven that they are not really handling this with the responsibility that is deserved and necessary to make sure that every person who has paid in has an ample amount that is equivalent or proportional down the road in retirement. So much to the fact that over the last 10 to 15 years, the Social Security Administration Trust Fund has openly said, in fact, put in bold on the Social Security statements that projected out into the future, they will not be able to pay all of the promised intended benefits. They put it on on the statement in bold on the front cover and again inside in bold print for years and years. And the date that they said that that time would come has continued to move closer and closer to us and not just because we've gotten closer and closer to it. They have brought the date back from 2039 to 2035 to now 2033, which is not that far away.

And the government has still not done anything to actually address the problem. And they've continued to lower the amount that they say they are going to continue to be able to maintain payments on from 83 percent to 81 to 79 to 75. I think the last report was that in 2033, they only expect to be able to pay 75 cents on the dollar of promised benefits.

And we've got a plan accordingly. I don't think they're going to sweep the rug out from underneath the feet of the people who this system was really intended for, again, to prevent old age and senior poverty. I think if you fall into the class where this is the only source of income, they're probably going to maintain it. But for folks that it is not the only source of income, they've got other monies, which we should strive to have. But there's probably going to be some changes to the system coming at some point in the future. And there are a few that make sense and there are a few that they've kicked around that I don't think make as much sense. But if they continue to delay actually addressing this problem, all all bets and all solutions are going to be on the table.

Absolutely. Well, I'm glad we had this conversation today, Peter. I think a lot of people were wondering about how the cola would affect them in twenty twenty five. And again, thanks again for correcting me for the twenty twenty five Medicare Part B changes. But if somebody has more questions, how can they get a hold of you?

Feel free to give me a call. And by the way, Social Security is a huge part of people's retirement plan and income and well-being. And it justifies spending some time just to look at this part of your retirement plan.

It can mean the difference in several hundreds of thousands of dollars over the course of retirement that either comes from Social Security or you have to pull from your personal assets and investments or just isn't there at all. And so I know the one that I would prefer is it to come from Social Security. Let's sit down for a half hour or an hour. Let's talk through your numbers.

Let's make sure that that part is optimized. Give me a call. Nine one nine three zero zero five eight eight six.

Again, Peter Rashan, we put together the optimized retirement plan, including looking at your Social Security, trying to help you make the best decision with that. Give me a call. Nine one nine three zero zero five eight eight six nine one nine three zero zero five eight eight six or email me Peter at Rashan planning dot com. It looks like rich on planning dot com Peter at Rashan planning dot com or online.

There's a place where you can click the button and get get to my calendar and schedule a call at Rashan planning dot com. Great. Peter, thank you. It's a pleasure. Thank you, Aaron.

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