Thanks to the Cost of Living Adjustments (COLA) increase in 2025, millions of Americans relying on Social Security and Supplemental Security Income (SSI) benefits will experience a slight but impactful boost to their benefits this year.
At OneTeam Financial, we’re committed to helping you stay informed of changes and topics that can affect your retirement planning. Factoring in this recent increase, let’s examine two crucial elements that could significantly impact your retirement income in 2025: Cost of Living Adjustments (COLA) and Delayed Retirement Credits (DRCs).
Breaking Down Recent COLA Changes
Let's look at the latest developments announced by the Social Security Administration that affect your benefits:
- 2023 delivered an exceptional 8.7% COLA increase – the largest adjustment in four decades
- 2024 had a 3.2% increase, still notably above historical averages
- In 2025 we’ll see a 2.5% adjustment. Although this is relatively low as compared to the prior two-year COLA adjustments, it is equal to the 20-year average for Social Security COLA adjustments.
When are COLA Adjustments Applied?
Your monthly payments automatically increase each January with the COLA adjustment. This helps protect your purchasing power against inflation – a critical factor in maintaining your retirement lifestyle, especially if you're managing a pension alongside your Social Security benefits.
Do You Still Get COLA if You Haven’t Filed for Social Security Yet?
You may be asking yourself the above question if you are past age 62 but have not yet collected a Social Security benefit and wondering if you still get credit for the COLA. There's something crucial that many people do not know: COLA benefits you whether you're collecting Social Security or not.
If you have not started collecting your Social Security benefits, then the annual adjustment will instead increase your Primary Insurance Amount (PIA), which is your estimated Social Security benefit at your Full Retirement Age (FRA). This adjustment due to COLA will provide you with a greater Social Security benefit once you eventually file for benefits.
The Power of Delayed Retirement Credits
Now, let's talk about DRCs – one of the most potent tools for maximizing your Social Security benefits. But how exactly do COLA increases and Delayed Retirement Credits get applied to benefits and projected benefits? For every year you delay benefits beyond your Full Retirement Age up to age 70, you earn an 8% increase through DRCs.
Here's a real-world example I share with clients:
- Starting point: $1,800 monthly benefit at Full Retirement Age (66)
- Strategic delay to age 70
- COLA adjustments increase the base amount to $2,000
- DRCs add 32% growth
- Final monthly benefit: $2,640
That's the power of strategic timing and understanding how these benefits work together.
Integrating COLA and DRCs into Your Retirement Strategy
At OneTeam Financial, we look at how these benefits fit into your complete retirement picture. Our retirement planning approach considers:
- How COLA affects your long-term Social Security benefits
- Strategic timing around your full retirement age
- Tax-efficient withdrawal strategies to manage Social Security tax implications
- Coordination with pension updates and other retirement income sources
Why Professional Guidance Matters
With Social Security rules spanning over 20,000 pages, making the most of these benefits requires specialized expertise. Our team stays current with every change to help optimize your plans for the future.
Ready to Maximize Your Benefits?
Understanding COLA and DRCs is just the beginning. Let's have a conversation about how these powerful benefit features fit into your comprehensive retirement plan.
Schedule a Consultation with our team to explore how we can help maximize your Social Security benefits as part of your overall retirement strategy.
Disclosure: Prosperity Capital Advisors prioritizes client interests with a planning-first approach, offering tailored strategies that account for market unpredictability and varying return patterns. Our dedicated team helps clients avoid common pitfalls such as expecting “average” returns and short-term market timing, ensuring strategies are built around individual goals and long-term investment horizons rather than annual return predictions.