If you receive Social Security benefits, you will receive a larger check starting in 2025. That’s good news.

Unfortunately, there is also bad news. When you receive your first check of the new year, you may be surprised to find that the benefit increase isn’t as big as you hoped.

Here’s why seniors could be in for a nasty surprise next year when they see their first check.

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Retirees receive smallest benefit increase in years

Over the past two years, retirees have enjoyed a fairly generous annual increase in their benefits. In 2024, for example, seniors saw their Social Security checks increase by 3.2%, and the year before, they saw a whopping 8.7% increase. In 2022, their checks also increased significantly, jumping 5.9%.

In 2025, by contrast, retirees will receive just 2.5% more in their Social Security checks than the amount they receive this year. For the typical senior receiving an average monthly benefit of $1,927, they will only receive $49 more, with the monthly benefit increasing to $1,976.

That’s not a lot of extra money, especially considering that Medicare premiums are expected to increase. Since Medicare premiums are taken directly from most people’s Social Security checks, retirees are not even likely to receive the full $49 extra than the $2 cost of living adjustment (COLA). .5% provides the average elderly person.

Why is the benefit increase much smaller this year?

Retirees will get a smaller benefit increase than they have received in years because inflation has started to ease. As prices have surged after the pandemic, inflation is starting to approach the standard 2% rate targeted by the Federal Reserve.

Since the COLA is directly linked to changes in a financial index that measures the cost of living, lower inflation rates result in a smaller increase. Of course, while it’s a good thing for seniors that prices aren’t rising as quickly, a smaller increase isn’t something most retirees will be happy with.

This is all the more true since seniors have been losing ground for years on their social security benefits. Indeed, the Seniors League estimates that retirees have lost around 20% of their purchasing power since 2008.

The metric used to measure inflation is imperfect because it compares year-over-year prices of a basket of goods and services used by urban wage earners and office workers. This underestimates seniors’ spending on housing and health care, both of which have seen their costs rise faster than the overall inflation rate.

With seniors already able to buy less, a 2.5% increase in benefits won’t help them catch up – and it could look like a financial disaster for those who have become accustomed to the big increases common in the post-pandemic era.

Retirees should start preparing now for the fact that their checks won’t be as big as they had hoped. If your COLA is smaller than expected, adjust your budget to keep your spending at a safe rate and avoid running out of money or going into debt and derailing your retirement security.