Social Security benefits and Supplemental Security Income (SSI) payments for over 72.5 million Americans are set to increase by 2.5% in 2025, announced the Social Security Administration (SSA). This change, which impacts millions of retirees, disabled individuals, and low-income seniors, will begin in January, with the average increase for Social Security recipients expected to be around $50 per month.
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This cost-of-living adjustment (COLA) is designed to help Social Security beneficiaries keep up with rising expenses, even as inflation cools off. For the nearly 68 million people receiving Social Security, this COLA will start in January 2025, while around 7.5 million SSI recipients will see the increase beginning December 31, 2024.
Key Changes to Social Security for 2025
- Cost-of-Living Adjustment (COLA) Increase:
The 2.5% COLA increase is a reflection of the moderate inflation rate experienced in the U.S. in the past year. Although this is smaller than the 3.2% COLA in 2024, it will still provide much-needed relief for many individuals relying on Social Security as their primary income. - Increase in the Maximum Earnings Subject to Social Security Tax:
The maximum amount of earnings subject to Social Security tax will increase to $176,100 in 2025, up from $168,600 in 2024. This adjustment, based on wage increases, helps ensure that the Social Security system remains solvent as wages grow across the economy. - Simplified COLA Notices:
For the first time, Social Security beneficiaries will receive a more streamlined and user-friendly COLA notice. This single-page notice will clearly outline the new benefit amounts, including any deductions, and provide the exact dates when these changes will take effect. - Medicare Adjustments:
Social Security beneficiaries who are enrolled in Medicare will also see changes to their benefit amounts as a result of adjustments to Medicare premiums. For instance, Medicare Part B premiums are set to increase, which may reduce the overall amount of the COLA increase for some individuals.
To ensure recipients can easily access their updated benefit information, the SSA has made it possible for people to view their COLA notices online through a personal “My Social Security” account. Beneficiaries can set up text or email alerts to notify them when their COLA notice is available.
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How COLA is Calculated
The annual COLA increase is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures inflation in the U.S. This ensures that Social Security benefits keep pace with changes in the cost of living.
With the 2.5% increase scheduled for 2025, retirees and others who rely on Social Security can plan for modestly higher payments, helping them manage the financial pressures of the new year. However, with rising healthcare costs and other economic factors, this increase may not fully offset the impact of inflation for many beneficiaries.
To learn more about your COLA notice or to set up your personal Social Security account, visit the official SSA website at www.ssa.gov/myaccount.
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