Medicare’s trustees have painted a mixed financial picture in their 2024 annual report, predicting that the standard Part B premium paid by most Medicare recipients is set to rise from $174.80 to $185 per month in 2025. For many Social Security beneficiaries, this projected increase would take a small bite out of the expected cost-of-living adjustment (COLA), which would effectively leave them with $10.20 less per month. The Centers for Medicare & Medicaid Services are expected to announce official Part B premium prices in mid-October, and these rates will impact millions of seniors’ monthly budgets.
Financial experts, like Lisa Featherngill, national director of wealth planning for Comerica Wealth Management, point out that while the COLA helps offset some of the financial strain caused by inflation, it may not fully capture today’s cost-of-living increases. According to Featherngill, the 2.5% inflation rate reported may not reflect what many Americans feel daily as they manage rising prices. Yet, she notes that the recent years of COLA increases have created a cumulative effect, helping to stabilize retirees’ finances even if prices in some sectors have remained high.
Social Security continues to be funded by a payroll tax rate of 12.4% on eligible wages, split between employers and employees. This payroll tax will apply to income up to $176,100 in 2025, rising slightly from $168,600 this year. Collected funds go toward current Social Security beneficiaries, with any surplus deposited into two trust funds, which support both retirement and survivor benefits and disability benefits. However, Social Security has been facing funding challenges, as benefits paid out have exceeded the tax revenue collected in recent years, forcing the Social Security Administration (SSA) to dip into its reserves. By the end of 2023, these reserves amounted to nearly $2.8 trillion, but the ongoing withdrawals to cover benefits highlight a financial gap that could impact the program’s long-term viability.
Social Security’s trustees project that, without intervention from Congress, the program’s trust funds will be depleted by 2035. If that happens, SSA would only be able to pay around 83% of scheduled benefits. This shortfall has spurred calls for bipartisan action to secure Social Security’s future. AARP has voiced concerns, with spokesperson Jenkins emphasizing the need for Congress to act sooner rather than later. According to Jenkins, adjustments to the COLA only provide temporary relief, and a comprehensive, bipartisan plan is essential to ensure that older Americans can continue to rely on Social Security.
The Medicare premium increase and Social Security’s looming funding challenges together emphasize the importance of securing financial stability for retirees. With the pressure mounting, organizations like AARP are urging policymakers to take meaningful steps to reinforce Social Security and protect the financial well-being of the aging population. The issue remains a critical topic as the nation inches closer to 2035, when Social Security’s ability to meet full benefit payments may be tested.
