UPDATE 2025 Social Security Increased CONFIRMED - How Much Will You Get?

There are over 72 million people that receive monthly Social Security benefits. For many people, that Social Security benefit keeps their head above water financially. At this time of the year, there's an opportunity for that benefit to actually increase. We call that a Cost of Living Adjustment, or COLA. In this video, I'm going to talk about the 2025 COLA and how the government arrived at this year's increase. Just before we get into the details of the COLA, I thought this may be of interest to you. Really, kind of the history of Social Security. Social Security legislation was really passed back in 1935. This is, of course, coming off of the Great Depression, a lot of poverty. And so the government passed legislation. However, it took them almost five years actually to implement their program fully. Now, the very first Social Security check was issued. It was issued to a legal secretary. Her name was Ida Mae Fuller, and her first check was $22.54 a month. Interesting enough about this lady, she actually lived to be 100 years old and drew a little over $22,000 from the Social Security system. All right, so now from 1940 to 1974, Social Security payments did increase. There were adjustments to people's Social Security checks, but it wasn't considered a COLA. Actually, what happened, this actually took an act of Congress. Very interesting. The only way Social Security checks went up would be through legislation. If you read the history of this, it happened a lot of times during election years, so it became very politically motivated. There were some times Social Security would be the same for five years in a row. But again, it could only take an act of Congress. Well, they realized not a real good decision. This is around the Nixon administration. So what they decided to do was they wanted to make them more of an automatic and more of a formulary-based type of an increase. From 1975 to the present day, Social Security increases are automatic. Of course, there's a formula that we follow to do that. I'm glad it's no longer an act of Congress, but rather this formula. So let me teach you a little bit about that. All right, let's just look real quickly at the formula that's used for these automatic increases. What the government is doing is they're tracking a consumer price index, and there's different types of indexes for sure. But the one that is covered and that really matters for our cost of living adjustment is actually called the CPI-W. And that stands for Consumer Price Index for Urban Wage Earners and Clerical Workers. So that age group of people, the kinds of things that they are buying. And so what happens is they do this from year to year. And so this would be from 2023 to 2024. But specifically, the third quarter comparison. So this would be third quarter to third quarter. And so that's why these numbers just came out. I'm shooting this video today. It's actually October the 15th, the beginning of the Medicare Open Enrollment season. But those numbers just came out on the 10th of this month because why we had to wait till the full third quarter so they can make this comparison. All right, so that's the formula that's used, the Consumer Price Index-W. All right, now let's look at some of the recent COLAs. Hey, if you found this video helpful and you want to see more Medicare information just like it, then go below, right below the video, and you can give us the thumbs up as well as subscribe to our channel. And every time I put a new video, which is about two every week, you'll be notified of that video. And others just like you who need this vital information will get it as well. Now, in the last decade, the average increases have been actually 2.6%. So let me show you how they've looked in the last five years. In 2020, if you're on Social Security, you would have got a 1.6% increase. 2021, 1.3%. And then, of course, we start seeing some very serious inflation. So 5.9% in 2022. 2023, the largest one. And then inflation, they're really getting a better handle on it. So last year, just 3.2%. All right, so that's some of the increase that happens. Let's talk about 2025, because that's really what we care about. And so when we did the formula, the CPIW, third quarter, third quarter, actually, there was inflation of 2.5%. All right, and so for the average person, what that means is they're getting about $50 more in their Social Security checks. All right, so we know we're going to get a 2.5% increase. The question is, how do they come up with that precise number? And again, we're comparing the CPIW third quarter 2023 to the third quarter 2024. So here's the numbers. Each month, of course, is reported. And that would be the total for the index for that third quarter. And we're going to compare that then to 2024. And as you can see, it's a higher number. So there was certainly some inflation, some increased cost of those goods and services. All right, so now let's look specifically at the formula. So what's going to happen is we're going to take 2024, and we're going to then subtract it from 2023. So let's take and let's actually look at those precise numbers. So our index was at 926.187. Okay, that's going to be A in our formula here. And we're going to subtract last year's index, which was 903.707, all right? And so that's going to put us at 22.48, okay? And we divide that back by what the 2023 number was. So I'm going to do that. So 903.707, right? And then that is 0.0249. We multiply that times 100. And that's going to give us rounded. It's going to be 2.49. Of course, they round that up to the nearest tenth. And so that's going to give us the 2.5% increase, all right? So the whole point is, if we had seen more inflation, certainly that number would have been higher. Therefore, you would have had a higher increase. And I know everyone gets excited about increase, but it also means there's more inflation. So as inflation begins to settle down some, then that's why we're not going to see such a large COLA for 2025. But the question is, how is that going to impact your particular Social Security check? And again, everyone's different. We're just going to look at some average numbers here. But the average person that is receiving Social Security retirement benefits, because there's also spousal benefits, which would be half of this, of course, in 2024 and 1927. So it went up again about $50 for the average person that's receiving retirement benefits. For a widow or a widower receiving survivor benefits, average 1788 went up to 1832. And so again, almost that $50 increase, not quite. Somebody that's on Social Security disability, the average 1542 went up to 1580. And then now this number here, very interesting. This is actually the maximum amount of Social Security that anyone would be receiving. And that means they maxed out all their years of paying in the Social Security system. This year, the most anyone would have received is 3822. And now it's 4018. Now, what's interesting about this number, this actually could be higher. This is actually at the maximum benefit at full retirement age, which for most people is 67 years old. So if they were to actually wait and delay that, they could grow that additional 24% if they waited to age 70. All right, so that's the average impact for these particular benefits. If you come to a place where you know, you're gonna have to make some Medicare decisions pretty soon, the best way to do that is to click up here in this right-hand corner, and you'll have an opportunity to book a call with one of our Medicare guides. All the guides around here, I have personally trained, and they truly are professional. They'll answer your questions, and they'll show you different Medicare options to make sure that you're confident in the decision that you make. All right, then the last issue that I want to address would be this question here. Is there an impact for those people that are not receiving Social Security benefits yet? In other words, will this COLA help them? And the answer is yes, it will at a certain age. All right, and so let's talk about this. So whenever the Social Security benefit is being calculated, the number that we're trying to arrive at is called the PIA. And it actually stands for your primary insurance amount. And this would be what we would be receiving from Social Security benefits once we have reached what is called our full retirement age. All right, and so this is the big number because this is the number that's going to tell us the basis that Social Security is going to use when we decide to turn on our Social Security benefits, PIA, primary insurance amount. So let me show you how this works. So what the government does is they take our top 35 years of earnings, top 35 years. If you only work 30 years, then you have some zeros in the equation. But they're going to take the top 35 years and they actually apply those years of earnings to an index. And so what happens is what they're going to do is they're actually going to inflate our wages because what I made 20 years ago, they want to bring that to current dollar amounts. And so they apply a wage index to do that for all of our working years up to age 60. And so they're doing that to give us the fair number. So top 35 years and all those are indexed up. And so when they take that full amount, 35 times this amount, what they're looking for would be our total lifetime earnings. Total lifetime earnings. It's a real important number, okay? And for most people, it's going to be a million and a half, two million, three million dollars or plus, all right? So total lifetime earnings that we've made during those 35 years. And they take that number, whatever that large number is, and they divide that by 420 months. Again, those 35 years. And then that number is called our AIM, Average Index Monthly Earnings, all right? And so let's just suppose that someone made, in fact, let me do it this way. Let's just say, let me give you a number here real quickly. Let's say that someone's total lifetime earnings was 2,310,000. And by the way, that looks like a big number, but it's really not over a 35-year period of time. But if that was my total lifetime earnings, that was my top 35 years indexed up, divided by 420 months, that gives me an average index monthly earnings of $5,500. So $5,500. And of course, that would be on a monthly basis, okay? And then they take that number, and they apply that to what they call bend points. And after we've applied our average monthly index to these bend points, that would then be our Social Security check amount, all right? Now, I'm gonna share the bend points with you. These are the new ones that just came out for 2025. And so our first bend point is $1,226. And what we get of that is actually 90%. Now, the next bend point, again, this is a new number, is $7,391, and we actually get 32% of that. Now, anything that's gonna be above that number there, we actually get 15%. Now, in my example, this person had $5,500 a month, so they didn't get above that second bend point, all right? So the way this works is our first $1,226 of our $5,500, we are actually gonna get 90% of that. And that would give us $1,103.40, okay? And so the number above 1,226, up to that number there, and again, we stop at 5,500. In this example, that would be, the difference is 4,274, and we get 32% of that, all right? So let's put that into the calculator, and that's gonna give us $1,367.68. Let me double check on that number to make sure that I'm right. 32%, 1,367.68. Okay, we didn't have anything here, so that's gonna be a blank. And so that's gonna be our Social Security check at full retirement age, 1103.40. So we have a check amount of $2,471.08 at our full retirement age, okay? 2471, 2471. And we just drop off the pennies. So that's gonna be our check at full retirement age. Now, most people right now have a full retirement age of 67. Anyone born between 1943 and 1954 had a full retirement age of 66. But after 1954, the government started adding two months to everyone's full retirement age. So if you're born in 1955, you have a full retirement age of 66 and two months. 1956, 66 and four months. 1957, 66 and six months. 1958, they had eight months. 1959, 66 and 10 months. And then anyone born 1960 thereafter has a full retirement age of 67. So let's keep that as our example. And so if I wait to age 67 with, again, that amount of lifetime earnings with these present bend points, that's gonna be my check amount. Now, we know that if we take our Social Security early, basically what happens on average, we're gonna lose about a 6% a year. So if someone took as early as 62, five years early, they're gonna lose about 30% of their PIA amount. So there's a reduction in benefit whenever we take early. One year is on average about 6%. But here's what happens. Our question is, though I decide not to take Social Security yet, do I still benefit from the cost of living adjustment? And the answer is yes, you do. Why is that? Because your PIA, because you haven't taken yet, that PIA has been established, but now that primary insurance amount is gonna continue to increase. And so what happens? My 2471, because of my cost of living adjustment this year is 2.5%. Then what would happen? That's gonna go up $61.78. And so I have a new PIA now. One year later, 2532.86, okay? And so if I were to take my full retirement age, I'm gonna get this amount. You see that? Now again, if I take early, I'm still gonna take less. But every time there's a cost of living adjustment, that number is added to your primary insurance amount. And by the way, that starts once you're 62, it starts going up. And so the point is you still benefit from that cost of living adjustment. So even though you're not taking, you still got the benefit at that 2.5%.