Personal Finance
Social Security to send notices revealing size of 2025 benefit checks
A new 2.5% cost-of-living adjustment
In 2025, retirement benefits will increase by about $50 per month, on average, according to the Social Security Administration.
That’s as all beneficiaries will see a 2.5% benefit increase due to the annual cost-of-living adjustment.
Notably, the benefit boost for 2025 will be the lowest since 2021. As the pace of inflation has subsided, the cost-of-living adjustment has come down with it, since the Social Security Administration uses government inflation data to calculate the annual change.
Beneficiaries saw the highest increases in four decades in 2023, when the COLA was 8.7%, and in 2022, when benefits went up by 5.9%. However, the annual COLA started to come down in 2024, with a 3.2% annual adjustment.
“Although price increases have moderated, it’s not as though inflation is over,” said Joe Elsasser, a certified financial planner and president of Covisum, a Social Security claiming software company.
If the pace of inflation picks up again, the annual COLA could go up again, he said.
Monthly Medicare Part B premiums to go up
Retirees who are enrolled in Medicare Part B — which covers physician services, outpatient hospital services and certain home health services and durable medical equipment — pay monthly premiums.
Medicare Part B premiums are often deducted directly from Social Security checks. Beneficiaries can also request to have Medicare Advantage or Part D premiums deducted from Social Security benefit payments, according to Mary Johnson, an independent Social Security and Medicare analyst.
In 2025, the standard monthly Part B premium will go up to $185 per month — a $10.30 increase from $174.70 this year.
At the same time, Medicare Part B beneficiaries will see their annual deductibles go up to $257 in 2025 — a $17 increase from the $240 annual deductible for 2024.
Medicare Part B premiums are based on a beneficiary’s modified adjusted gross income, or MAGI, from two years prior. In 2025, beneficiaries who had less than or equal to $106,000 in MAGI in 2023 will pay the standard monthly Part B premium, as will married couples with less than or equal to $212,000.
However, beneficiaries with higher incomes will be subject to income-related adjustment amounts, or IRMAA, that increase their monthly premium payments.
About 8% of Medicare Part B beneficiaries are affected by those income-related adjustments, according to the Centers for Medicare and Medicaid Services.
Income changes may prompt higher taxes
Social Security beneficiaries may request to have withholding for federal taxes from their benefit payments.
Beneficiaries may want to consider whether they want to adjust those withholdings, particularly if they anticipate more of their benefits could be taxed, according to Jim Blair, vice president of Premier Social Security Consulting.
Social Security benefits are taxed on a formula called combined income — the sum of adjusted gross income, nontaxable interest and half of Social Security benefits. Beneficiaries may pay no taxes on their benefits, if their combined income is low enough, or up to 50% or 85% of their benefits may be subject to federal taxes if their combined incomes are above certain thresholds.
“What we’ve seen with clients is kind of a surge in other income that has caused more of their Social Security to be taxed,” said CFP Brian Vosberg, president of Vosberg Wealth Management in Glendora, California.
For example, retirees who have $200,000 in money market accounts or certificates of deposit are seeing higher interest payments on that sum after the Federal Reserve’s string of rate hikes in recent years. That interest income may require beneficiaries to pay a higher federal tax rate on their benefits, Vosberg said.
Proactive tax planning can help alleviate that situation, Vosberg said. Strategies such as buying an annuity that lets that interest grow tax deferred or reducing income from other areas, such as IRA withdrawals, can help minimize the tax bite, he said.
Retirees should also take note if their incomes have meaningfully changed in the past couple of years, according to Blair. If that’s the case, their monthly Medicare Part B premium rate may no longer be accurate. Beneficiaries can notify the Social Security Administration of life-changing events that affect their incomes and Medicare premiums by filling out a Form SSA-44.
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Some states have stopped disbursing funds to consumers via Biden-era rebate programs tied to home energy efficiency, due to a Trump administration freeze on federal funding enacted in January.
The Inflation Reduction Act, passed in 2022, had earmarked $8.8 billion of federal funds for consumers through two home energy rebate programs, to be administered by states, territories and the District of Columbia.
Arizona, Colorado, Georgia and Rhode Island — which are in various phases of rollout — have paused or delayed their fledgling programs, citing Trump administration policy.
The White House on Jan. 27 put a freeze on the disbursement of federal funds that conflict with President Trump’s agenda — including initiatives related to green energy and climate change — as a reason for halting the disbursement of rebate funds to consumers.
That fate of that freeze is still up in the air. A federal judge issued an order Tuesday that continued to block the policy, for example. However, it appears agencies had been withholding funding in some cases in defiance of earlier court rulings, according to ProPublica reporting.
In any event, the freeze — or the threat of it — appears to be impacting state rebate programs.
“Coloradans who would receive the Home Energy Rebate savings are still locked out by the Trump administration in the dead of winter,” Ari Rosenblum, a spokesperson for the Colorado Energy Office, said in an e-mailed statement.
The U.S. Department of Energy and the White House didn’t return a request for comment from CNBC on the funding freeze.
In some states, rebates are ‘currently unavailable’
Consumers are eligible for up to $8,000 of Home Efficiency Rebates and up to $14,000 of Home Electrification and Appliance Rebates, per federal law.
The rebates defray the cost of retrofitting homes and upgrading appliances to be more energy efficient. Such tweaks aim to cut consumers’ utility bills while also reducing planet-warming carbon emissions.
California, the District of Columbia, Maine, Michigan, New Mexico, New York, North Carolina and Wisconsin had also launched phases of their rebate programs in recent months, according to data on an archived federal website.
All states and territories (except for South Dakota) had applied for the federal rebate funding and the U.S. Department of Energy had approved funding for each of them.
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The Arizona Governor’s Office of Resiliency said its Home Energy Rebates programs would be paused until federal funds are freed up.
“Due to the current federal Executive Orders, memorandums from the White House Office of Management and Budget, and communications from the U.S. Department of Energy, funding for all Efficiency Arizona programs is currently unavailable,” it said in an announcement Friday.
Rhode Island paused new applications as of Jan. 27 due to “current uncertainty” with Inflation Reduction Act funding and executive orders, according to its Office of Energy Resources.
The Georgia Environmental Finance Authority launched a pilot program for the rebates in fall 2024. That program is ongoing, a spokesperson confirmed Monday.
However, the timeline for a full program launch initially planned for 2025 “is delayed until we receive more information from the U.S. Department of Energy,” the Georgia spokesperson explained in an e-mail.
However, not all states have pressed the pause button: It appears Maine is still moving forward, for example.
“The program remains open to those who are eligible,” Afton Vigue, a spokesperson for the Maine Governor’s Energy Office, said in an e-mail.
The status of rebates in the eight other states and districts to have launched their programs is unclear. Their respective energy departments or governor’s offices didn’t return requests for comment.
‘Signs of an interest’
While the Trump administration on Jan. 29 rescinded its memo ordering a freeze on federal grants and loans — two days after its initial release — the White House said the freeze nonetheless remained in full force.
Democratic attorneys general in 22 states and the District of Columbia filed a lawsuit against the Trump administration, claiming the freeze is unlawful. The White House has claimed it is necessary to ensure spending aligns with Trump’s presidential agenda.
David Terry, president of the National Association of State Energy Officials, said he is optimistic the rebate funding will be released to states soon.
“For these two particular programs, I do not think [the freeze] will stymie the programs,” Terry said. “I see signs of an interest in moving them forward and working with the states to implement them.”
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Lump sum payments to begin arriving in February
In a new update released on Tuesday, the SSA said it will begin issuing retroactive payments in February. Most people will receive the one-time payment by the end of March, according to the agency.
The SSA plans to process the increase to monthly benefits starting in April.
The new timeline “supports President Trump’s priority to implement the Social Security Fairness Act as quickly as possible,” Social Security acting commissioner Lee Dudek said in a statement.
“The agency’s original estimate of taking a year or more now will only apply to complex cases that cannot be processed by automation,” Dudek said. “The American people deserve to get their due benefits as quickly as possible.”
Among those affected include some teachers, firefighters and police officers in certain states; federal employees who are covered by the Civil Service Retirement System and people who worked under foreign social security systems, according to the Social Security Administration.
What affected beneficiaries should know
Retroactive payments, which most people should receive by the end of March, will be deposited directly into bank accounts on file with the Social Security Administration.
All affected beneficiaries should receive a notice by mail from the Social Security Administration with details about their retroactive payment and new benefit amount. Those notices should come two to three weeks after the retroactive payments, according to the agency.
If your direct deposit information or current mailing address are up to date with the agency, no action is needed, according to the agency. If you want to double check the information the agency has on file, you may sign into your personal online account or call the agency.
If you want to ask about the status of your retroactive payment, the Social Security Administration urges you to hold off until April.
Beneficiaries should also wait until after they have received their April monthly check before contacting the agency to ask about their new benefit amount.
The average tax refund is 10.4% lower than last year according to the latest Internal Revenue Service data, and inflation is taking more of those dollars.
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The average tax refund this year is down 32.4% compared to last year, according to early filing data from the IRS.
Tax season opened on Jan. 27, and the average refund amount was $2,169 as of Feb. 14, down from $3,207 about one year prior, the IRS reported on Friday. That figure reflects current-year refunds only.
However, the Feb. 14 filing data doesn’t include refunds receiving the earned income tax credit or additional child tax credit, which aren’t issued before mid-February, the IRS noted. The previous year’s filing data included tax returns claiming these credits. The value of these tax breaks can be substantial, even resulting in five-figure refunds, in some cases.
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Typically, you can expect a refund when you overpay taxes throughout the year via paycheck withholdings or quarterly estimated payments. By comparison, there’s generally a tax bill when you haven’t paid enough.
Filing season numbers will ‘even out’
Although the average refund is currently smaller, “historically, filing season numbers even out as more tax returns come in,” according to the agency.
As of Feb. 14, the IRS received roughly 33 million individual tax returns of the more than 140 million it expects before the April 15 deadline.
As of Dec. 27, 2024, the average tax refund for the 2024 season was $3,138, compared to $3,167 in late December 2023.
‘Don’t call the IRS’ for refund updates
The latest filing statistics come amid mass layoffs for the agency as Elon Musk’s so-called Department of Government Efficiency, or DOGE, continues to cull the federal workforce.
It’s unclear exactly how the staffing reduction could impact future taxpayer service. But experts recommend double-checking returns for accuracy to avoid extra touch points with the agency.
“Don’t call the IRS looking for your refund,” said Tom O’Saben, an enrolled agent and director of tax content and government relations at the National Association of Tax Professionals.
You can check the status of your refund via the agency’s “Where’s My Refund?” tool or the IRS2Go app, which is “available 24 hours a day,” O’Saben said.
Typically, the agency issues refunds within 21 days of a return’s receipt. But some returns require “additional review,” which can extend the timeline, according to the IRS.
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