Social Security Cola Increase 2025: The Social Security Administration (SSA) recently revealed a 2.5% cost-of-living adjustment (COLA) for 2025, which will benefit approximately 73 million Americans. While the increase will bring some relief to those relying on Social Security as a primary income source, it falls slightly below last year’s 3.2% adjustment.
This update is essential for many, as Social Security comprises half of the income for 50% of people aged 65 and older, and 90% or more of income for 25% of these individuals. Here’s a breakdown of what retirees need to know about the Social Security COLA increase for 2025.
What the 2.5% Increase Means for Benefits
The 2.5% COLA adjustment translates to an additional $50 monthly for the average retired worker receiving $1,920, bringing the new monthly benefit to approximately $1,968 starting in January. Supplemental Security Income (SSI) recipients will see this increase take effect slightly earlier on December 31, 2024.
This adjustment aims to help recipients maintain their purchasing power as prices continue to rise, though it’s a slight decrease from last year’s increase.
COLA and Inflation Rates
The 2.5% adjustment closely aligns with recent inflation data, where the average inflation rate for the year ending in September 2024 was 2.4%. While the increase might not feel substantial, it’s intended to keep pace with the rising cost of essentials.
With an average COLA of around 2.6% over the past decade, this increase is in line with historical trends, though the SSA is striving to counteract inflationary pressures as much as possible.
Higher Taxable Earnings for Workers in 2025
Another change to Social Security in 2025 is the increase in maximum taxable earnings. Currently capped at $168,600, the new limit will be $176,100 in January 2025. This update affects workers and employers who pay Social Security taxes, as the SSA tax rate remains at 12.4% (split as 6.2% each between employees and employers).
For employees, this means up to $10,918.20 will be taxed for Social Security, while self-employed individuals, who pay the entire 12.4%, will contribute up to $21,836.40.
Simplified COLA Notices Arriving in December
In early December, the SSA will begin mailing COLA notices with a streamlined, one-page design to simplify the information. The notice will include each recipient’s new benefit amount, applicable deductions, and the exact dates when changes take effect.
Those with a my Social Security account can access their notice online as well, potentially getting an early look before mailed notices arrive.
Additional Updates for Medicare Recipients
Medicare will also see changes in 2025. For those enrolled in both Social Security and Medicare, benefit updates will be available in the my Social Security Message Center by late November, offering Medicare participants an early view of the new amounts.
Additionally, Medicare.gov provides updated information on changes to coverage and premiums.
Staying Informed for 2025
As Social Security remains a cornerstone of financial stability for millions of retirees, these updates provide a roadmap for beneficiaries planning for the year ahead. To ensure you stay informed, log in to your my Social Security account, where you can receive email or text alerts about any further adjustments. With these changes, Social Security continues to adjust for inflation, making small yet impactful improvements for 2025.
This COLA update underscores the program’s commitment to helping retirees maintain purchasing power and manage inflation, and it’s especially relevant as beneficiaries prepare to navigate the economic landscape of the coming year.
