Social Security benefits will arguably lose buying power next year because the 2.5% COLA understates inflation.

In December, SSI recipients will receive their payments a day early – Dec. 31 – because Jan. 1 is the New Year’s Day holiday. These checks will reflect two different amounts because the 2025 Cost of Living Adjustment increase will apply to the payment made on Dec. 31.

Medicare Part B premiums are rising again in 2025. The jump outpaces both Social Security's 2025 COLA and inflation, further squeezing seniors.

The most direct and obvious effect of the new COLA is the increase in monthly benefits. If your monthly Social Security benefit is $1,000 this year, it will be $1,025 starting in January 2025. If it's $2,000 now, it'll be $2,050.

A Social Security cost of living increase offers retirees options such as managing costs, saving or enjoying small splurges.