Millions of Americans rely on Social Security benefits, which are getting stretched thinner daily. Inflation is causing the cost of goods and services to skyrocket in today’s economy so that retirees can buy fewer goods with their Social Security checks.
Sometimes, this might mean buying less food or going without other necessities. Thankfully, the Social Security Administration adjusts benefits annually to account for inflation. This increase can help offset the impact of inflation and allow retirees to maintain the same standard of living.
So, just how much of an increase will you see in 2025? Keep reading as we give you all the details about how much of an increase you can expect and when you will see it.
Social Security COLA Increase For 2025
The Social Security cost-of-living adjustment for 2025 will be lower than the previous few years but still higher than the average for the past 10 years. Benefit recipients will see a 2.5% increase in their benefits in 2025. The reason for the more significant increase is because of high inflation. Remember that the COLA increase is tied to the consumer price index. The larger the increase in the cost of goods and services, the larger the increase in Social Security benefits will be.
Offset Higher Living Costs
Even though a more extensive check sounds excellent, there is something that you need to remember. This increase in benefits is not really like getting a raise. An increase in the cost of living is necessary for beneficiaries to maintain their current financial position. Without the increase, beneficiaries would see a decrease in their standard of living due to the increased cost of goods. The increase in benefits is simply an attempt to help them maintain the status quo.
Medicare Part B Increase
In addition to the increase in Social Security payments, 2025 will see an increase in Medicare Part B premiums. If enrolled in Medicare Part B, you can expect an increase of just over $10 in your monthly premium. The standard premium will increase from $174.70 to $185 per month. Since many people have their premiums automatically deducted from their Social Security check, this increase in the premium will also lead to a slight reduction in their monthly check.
KEY TAKEAWAYS
- COLA stands for cost-of-living adjustment and is the annual benefit increase Social Security and SSI recipients receive.
- The 2025 cost of living adjustment will be effective January 2025. Recipients of Social Security benefits will see the change on their January payment.
- In 2025, the COLA increase is 2.5%, meaning a person who received $25,000 annually in 2024 will now get $25,625.
When Will The 2025 Cost-Of-Living Adjustment Take Effect?
The 2025 cost-of-living adjustment will take place in January 2025. Social Security recipients likely already know that they see their COLA increase each year in January, and 2025 will be no different. You will see an increase in your monthly benefit amount on your Social Security check in January. This applies to both retirement benefit payments and SSI payments. There is an easy way to determine how much your new payment will be without manually calculating it.
You can create a my Social Security account to view your information online. Once you log into your account, you can access many tools and online services. As long as you create your account before November 15, you can see your new benefit amount before it takes effect. Log into your account in early December, and you should see information about the annual cost-of-living adjustment. You will see your new benefit amount displayed in your COLA notice in the message center, and you can expect to begin receiving that new benefit amount in January.
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How Changes To Social Security Benefits Are Calculated
Calculation Methodology
We already mentioned that changes to benefits are calculated based on inflation, but how is that calculation performed? Here is how the Social Security Administration determines the change to your benefit payments. The SSA calculates the increase in Social Security benefits using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the Bureau of Labor Statistics.
The CPI-W is measured at the end of the current year’s third quarter, and the number is compared to the measurement at the end of the third quarter of the last year in which there was a COLA increase. The percentage increase in the CPI-W from one year to the next will determine the percentage increase in benefit payments.
Declining Prices
When inflation is trending higher and higher, you can expect to see COLA increases every year. However, when prices fall, you will not see a benefit increase. Thankfully, the Social Security Administration will not lower benefit payments during these periods. If there is no increase or a decrease in the CPI-W from one year to the next, there will be no COLA increase for the following year.
In addition to monthly benefit payments to retirees, the COLA increase also affects the Social Security tax limit, Social Security earnings limit, and maximum Social Security benefit. We will discuss the impact of the COLA on other benefits later in this article.
TIP
If you create a my Social Security account before November 15th, you can view your new benefit amount in your account before it takes effect.
Benefits Affected By COLA Increase
You already know that Social Security retirement benefits increase due to the increased cost of living, but what about other benefits administered by the Social Security Administration? Here is how the COLA affects different types of benefits.
Benefits For Retirees
As a result of the COLA increase, older Americans will see a 2.5% increase in their retirement benefits. In addition, the COLA increase affects retirement benefits in several ways. The Social Security earnings limit increases, which means that older Americans receiving Social Security benefits while still working can earn more money before reaching full retirement age without affecting their Social Security payments.
This amount increases to $23,400 in 2025 for individuals who have not yet reached full retirement age and to $62,160 in the year in which the individual reaches full retirement age.
Disability Benefits
SSDI benefits, similar to retirement benefits, will also increase due to the annual COLA. The average SSDI recipient received approximately $1,537 in 2024 and can expect an increase of $38 monthly in 2025. This increase will take effect in January, and dependents who receive benefits due to a disabled parent will also see a 2.5% increase in their payments.
SSI Benefits
Supplemental Security Income recipients will see the same percentage increase as other Social Security recipients. Remember that you do not need a work history or earnings record to qualify for SSI payments. For this reason, these benefits are typically much lower than retirement or SSDI benefits.
In 2025, SSI recipients will see the maximum monthly benefit amount rise to $967 for an individual and $1,450 for an individual with an eligible spouse. Also, remember that participation in the SSI program automatically qualifies you for other assistance programs, like food stamps, housing assistance, or a free cell phone.
Maximum Social Security Benefit
Since there is a Social Security tax limit, there is a maximum amount that you can pay into the system each year. Because of this, you can only receive up to a maximum amount in retirement benefits. This maximum amount increases every time there is a COLA increase. For 2025, the maximum Social Security benefit amount should increase to $5,108.
Remember that receiving the maximum payment amount takes more than earning the Social Security tax limit each year. You must earn the maximum amount for at least 35 years. In addition, you must wait until age 70 to start your benefits. Waiting until age 70 will allow you to max out your delayed retirement credits, thus making your benefit payment as high as possible.
The Bottom Line
The 2025 Social Security increase will be much smaller than the last several years, which saw one of the largest increases in 40 years. The COLA increase applies to all retirement benefits recipients and SSDI and SSI beneficiaries.
The increase is calculated based on the CPI-W at the end of the third quarter of the current year, and there is no adjustment during years in which the CPI-W shows a decline in the cost of goods. In addition to the increase in benefit payments, the COLA increase will also increase the Social Security earnings limit and tax limit.
Frequently Asked Questions
No, the increase in Social Security does not affect the retirement age. The increase only affects the amount of your benefit payment. For most people, the full retirement age will still be 66 or 67. While an adjustment is one of the potential future changes to Social Security, the annual COLA does not affect the retirement age.
You can still start your benefits as early as age 62, but you will significantly reduce your primary insurance amount if you do so. For those already receiving benefits, you can expect your monthly increase in January 2025.
The Social Security increase for 2025 is 2.5%. This means your benefit payments will increase by 2.5% each month beginning in January. The increase applies to recipients of retirement benefits, SSDI benefits, and SSI benefits. Along with the increase in benefits, Medicare enrollees will also see an increase of approximately $10 per month in their Part B premium.
The amount of a 2.5% increase depends on how much your benefits are currently worth. If you currently receive $2,000 monthly, a 2.5% increase will generate a $50 monthly increase. However, if you only receive $1,000 per month, then your increase will only be $25 per month. Take your current benefit amount and multiply it by 2.5%. This will quickly show you how much of an increase you will see in your monthly payment.
No, the COLA will not cause your benefits to decrease. In some years, the consumer price index might fall. However, this does not mean that your benefits will decrease. It simply means that your benefits will not increase in that year. Rest assured that you will continue receiving the same benefits you received the previous year.
You can find a Social Security Administration office near you by using our SSA office locator and searching for your closest location.
