2025 Social Security COLA increase: How much will benefits go up?

Spread the love

According to CNBC, To keep pace with inflation, the Social Security Administration (SSA) adjusts the benefits amount beneficiaries receive each year. The cost-of-living adjustment (COLA) for 2025 will be announced on October 10, 2024.

In 2024, Social Security benefits increased by 3.2%. However, as inflation has cooled, analysts are predicting a smaller adjustment for the upcoming year. Approximately 68 million Americans received monthly Social Security benefits in 2024, totaling around $1.5 trillion. According to a Gallup survey conducted in April, more than a third of retirees report that their checks are a major source of income.

Understanding the Social Security COLA

Since 1975, the SSA has made annual adjustments to benefits to align with inflation. This yearly increase is calculated based on the changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Following the post-pandemic surge in inflation, COLA increases have been notably higher in recent years:

  • 2021: 1.3%
  • 2022: 5.9%
  • 2023: 8.7%
  • 2024: 3.2%

While it is rare for benefits to remain static, it has occurred: since the COLA’s inception in 1975, there have been three instances (2009, 2010, and 2015) where the adjustment was 0%. These adjustments aim to help seniors keep pace with rising prices, as the Consumer Price Index has increased by 24.6% since 2021. If the adjustment for 2025 is set at 2.5%, the cumulative increase in SSA benefits would be close to 23.4%.

Projected Social Security Increase for 2025

The official COLA announcement for 2025 will be made on October 10, 2024. The nonprofit Senior Citizens League and The Center for Retirement Research at Boston College have both predicted a rise of 2.5%. If these predictions hold true, it would signify a more modest increase compared to the 3.2% hike in 2024.

Current data from the U.S. Bureau of Labor Statistics indicates that inflation continues to decline from its post-pandemic peaks. The August 2024 Consumer Price Index report showed a 2.5% increase in average prices since August 2023—the smallest 12-month increase since February 2021.

Should the COLA be set at 2.5%, it would result in an average monthly bump of approximately $48 in Social Security benefits, raising the average check for retired workers to $1,966. Recipients will receive an official notice regarding their 2025 benefits in December. However, individuals can access this information online through their mySocialSecurity accounts in mid-November.

How is the Social Security COLA Calculated?

The COLA is tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), calculated by the Bureau of Labor Statistics based on average prices for household goods such as food, housing, and transportation. The COLA for any given year is determined by the CPI-W data collected in the third quarter of the previous year. Thus, the COLA for 2025 will be based on data from July to September 2024.

Changes to Social Security in 2025

To qualify for Social Security retirement benefits, individuals must earn 40 work credits over their lifetime, with a maximum of four credits available each year. Earning four credits in 2024 required making more than $6,920. This amount is expected to increase in 2025, although the specific figure will not be revealed until the COLA announcement on October 10. The maximum annual earnings subject to the Social Security tax may also rise; in 2024, this cap is set at $168,600, reflecting an increase of $8,400 from 2023.

Average Social Security Benefits

The amount of Social Security benefits you receive depends on various factors, including your income throughout your working years and the age at which you begin claiming benefits. In June 2024, the average monthly Social Security benefit for retired workers was $1,918, while the average for all recipients—including spouses, children, and disabled workers—was $1,781. According to the SSA, half of seniors who receive Social Security depend on these benefits for at least 50% of their household income, with a quarter relying on them for at least 90%.

Also Read: BIG NEWS: Distressed retail food brand files for Chapter 11 bankruptcy

To enhance retirement comfort, supplementing Social Security benefits with an employer-sponsored 401(k) or an individual retirement account (IRA) can be beneficial. Charles Schwab and Betterment are ranked among the top options for IRAs.

When Will the Increase Be Reflected in Social Security Checks?

The 2025 COLA will take effect starting with benefit checks for most recipients in January 2025. The arrival date of your check depends on your birth date:

  • If you were born between the 1st and 10th of the month, expect your increase on January 8, 2025.
  • If your birthday falls between the 11th and 20th, anticipate it on January 15, 2025.
  • For those born between the 21st and the end of the month, your increased check will arrive on January 22, 2025.

Some recipients may see the increase even sooner:

  • If you’ve been receiving Social Security benefits since before May 1997, your first check of the year will arrive on January 3, 2025.
  • Recipients of Supplemental Security Income (SSI) typically receive their checks on the first of the month. However, since New Year’s Day is a federal holiday, those checks will be issued on December 31, 2024.

A complete calendar of Social Security payment dates is available online.

Eligibility for Collecting Social Security Benefits

Eligible workers can start receiving Social Security benefits at age 62. However, if they choose to take benefits before reaching full retirement age, their monthly payments will be reduced.

Year of birthSocial Security full retirement age
1943-195466
195566 and two months
195666 and four months
195766 and six months
195866 and eight months
195966 and 10 months
1960 or later67

Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *