Race Day Live The first Social Security checks of 2025 will include a 2.5% increase. This is the lowest annual cost-of-living adjustment (COLA) since 2021. On average, retirees will see their monthly payments rise by about $50, according to the Social Security Administration.
However, with inflation still affecting the cost of everyday necessities, some retirees may feel that the increase is not enough.
“I think overall, folks are glad to see the raise,” said Jim Blair, founder of NSSA Professionals and a former Social Security administrator. “It’s not necessarily keeping up with everything, but it’s better than nothing.”
Inflation and the Cost-of-Living Adjustment
The latest government inflation data shows that the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which determines the annual COLA, increased by 2.8% over the last 12 months as of December.
While the 2025 Social Security adjustment provides some relief, retirees looking for bigger benefit checks can consider two key strategies to help maximize their payments.
1. Adjust Your Tax Withholdings
Social Security beneficiaries may have up to 22% of their benefits withheld for taxes. If you need more money now, you might consider adjusting your tax withholdings.
“If you’re struggling a little bit, particularly if you’re not in too high of a tax bracket, you can always adjust that,” Blair said.
If you’ve been receiving refunds on your tax returns, lowering your withholdings can provide access to more funds throughout the year. However, this also means your refund next year will be smaller.
It’s important to be cautious—adjusting withholdings too much may result in owing money at tax time. Beneficiaries can change their tax withholdings by filing Form W-4V with the Social Security Administration.
2. Request a Medicare Premium Adjustment
Most retirees pay a standard monthly premium for Medicare Part B, which covers preventive care, medically necessary services, and durable medical equipment. In 2025, this standard premium is set at $185 per month.
However, retirees with higher incomes pay additional costs known as the Income-Related Monthly Adjustment Amount (IRMAA). This adjustment also applies to Medicare Part D prescription drug plans, which have an average estimated monthly premium of $46.50 in 2025.
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How to Reduce Your Medicare Premiums?
Medicare premiums are based on income tax filings from two years prior. If you’ve experienced a significant life event that has lowered your income—such as retirement, selling an income-generating business, or the death of a spouse—you may qualify for an adjustment.
Retirees in this situation can request a review to lower their Medicare withholdings. This could result in smaller deductions from their Social Security benefits, allowing them to keep more of their monthly payments.
Making the Right Financial Moves
While the 2.5% COLA increase provides some extra money for retirees, these two strategies—adjusting tax withholdings and requesting a Medicare premium adjustment—can help stretch Social Security benefits further.
If you’re unsure about making changes, consider speaking with a financial advisor to determine the best approach based on your situation.
By making smart financial decisions, retirees can maximize their Social Security checks and better manage their expenses in 2025 and beyond.
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