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We’ve got two more months of inflation data to go. But right now, some estimate that Social Security benefits could see a 2.57% hike for the cost-of-living adjustment in 2025.Some retirees might be looking at an extra $47 or so a month beginning in 2025 — if they receive the average benefit of around $1,840 a month. But, remember that would be before any increase in Medicare Part B premiums, which would be announced later in 2024.It wouldn’t be a huge gain, as inflation has been cooling off in the past year. And, if that estimate proves correct, the COLA hike would be down slightly from a 3.2% boost to benefits for more than 71 million people in 2024.Overall, retirees and those receiving Supplemental Security Income benefits could see a fairly average increase.What many don’t understand about how COLA worksI’ve seen some questionable advice online, though, that implied it could be better to retire in 2024 than 2025 to lock in that COLA increase for next year. But that kind of advice doesn’t make sense on the surface.Protect your assets: Best high-yield savings accounts of 2023Most people do not realize that they automatically will benefit from next year’s COLA — even if they have not yet filed for Social Security — as long as they are at least 62 or older in 2024.”The COLA should not be used to determine a retirement date at all because it is automatically factored into the benefit calculation used by Social Security,” said Mary Johnson, an independent Social Security and Medicare policy analyst who has been forecasting COLA hikes for several years.”In other words, the prospective benefit amount is adjusted for inflation even before claiming it.”The Social Security Administration confirmed that people are eligible for cost-of-living benefit increases starting with the year they turn age 62. And that is true even if they don’t get benefits until their full retirement age, now age 67 for those born in 1960 or later, or if they even wait as long as possible to claim higher monthly benefits at age 70. Regardless of your full retirement age, Social Security notes, your monthly payment will be higher the longer you wait to apply, up until age 70.”We add cost-of-living increases to their benefits beginning with the year they reach 62. Benefits are adjusted yearly to reflect the increase, if any, in the cost-of-living as measured by the Consumer Price Index,” according to Darren Lutz, a spokesperson for the Social Security Administration.More data will be needed for final inflation adjustmentThe latest inflation numbers for July offer the first clue when it comes to forecasting the Social Security COLA calculation for 2025.The Senior Citizens League, a nonpartisan advocacy group, issued the 2.57% estimate shortly after the July inflation data was released by the U.S. Bureau of Labor Statistics on Aug. 14.Mark Zandi, chief economist for Moody’s, said Moody’s is estimating a 2.6% COLA increase, which is in line with the Senior Citizens League’s figure.”Inflation is moderating as the fallout from the pandemic and Russian …
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