2025 Social Security COLA Increase: What to Expect for Benefits in the New Year
According to CNBC, To keep pace with inflation, the Social Security Administration (SSA) adjusts the benefits received by beneficiaries each year. The cost-of-living adjustment (COLA) for 2025 is set to be announced on October 10, 2024. In 2024, the Social Security increase was 3.2%, but analysts are predicting a smaller adjustment for the upcoming year due to cooling inflation.
Current Benefits and Inflation Impact
In 2024, nearly 68 million Americans received monthly Social Security benefits, totaling approximately $1.5 trillion. According to a Gallup survey conducted in April, more than one-third of retirees rely on these checks as a major source of income.
Understanding the Social Security COLA
Since 1975, the SSA has adjusted benefits at the beginning of each calendar year to keep up with inflation. This annual increase is based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Recent years have seen higher COLAs due to post-pandemic inflation spikes:
- 2021: 1.3%
- 2022: 5.9%
- 2023: 8.7%
- 2024: 3.2%
While it’s rare for benefits to remain static, this has occurred in years like 2009, 2010, and 2015. Since 2021, the Consumer Price Index has risen by 24.6%. If the 2025 adjustment is indeed 2.5%, cumulative increases will nearly match inflation with a total rise of 23.4%.
Anticipated Changes for 2025
The Social Security Administration will officially announce the COLA for 2025 on October 10, 2024. Predictions from the nonprofit Senior Citizens League and The Center for Retirement Research at Boston College suggest a 2.5% rise, which would be more modest compared to the 3.2% increase in 2024.
Inflation continues to decrease from its post-pandemic highs; for example, the August 2024 Consumer Price Index report indicated only a 2.5% increase in average prices since August 2023. Should the 2.5% COLA be confirmed, it would translate to an average bump of $48 in monthly Social Security benefits, raising the average check for retired workers to $1,966.
Accessing Your 2025 Benefit Information
Social Security recipients will receive an official notice regarding their 2025 benefits in December. Additionally, beneficiaries can view their updated information online through their mySocialSecurity account in mid-November.
How is the Social Security COLA Calculated?
The COLA is directly tied to the CPI-W, calculated by the Bureau of Labor Statistics, which assesses the average prices of essential household goods, including food, housing, and transportation. The adjustment for any given year relies on the CPI-W data from the third quarter of the previous year. Thus, the 2025 COLA will be based on data from July to September 2024.
Qualification for Social Security Retirement Benefits
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. In 2024, earning four credits required making more than $6,920, and this amount is expected to rise in 2025. Additionally, the maximum amount of annual earnings subject to Social Security tax is projected to increase, building on the 2024 cap of $168,600.
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Average Social Security Benefits
The specific Social Security benefits an individual receives depend on various factors, including income throughout their working years and the age at which they begin claiming benefits. As of June 2024, the average monthly benefit for retired workers was $1,918, while the average check for all recipients—including spouses, children, and disabled workers—was $1,781.
Notably, half of seniors receiving Social Security rely on these benefits for at least 50% of their household income, and a quarter depend on them for 90% or more of their income. To enhance retirement income, it’s advisable for beneficiaries to supplement their benefits with employer-sponsored 401(k) plans or individual retirement accounts (IRAs).
Timeline for Seeing Your Increased Benefits
The 2025 COLA increase will begin to reflect in benefit checks for most recipients starting in January 2025, with timing dependent on the beneficiary’s birth date:
- Born between the 1st and 10th: Check arrives on January 8, 2025.
- Born between the 11th and 20th: Check arrives on January 15, 2025.
- Born between the 21st and end of the month: Check arrives on January 22, 2025.
Certain recipients may receive their increases sooner. Those receiving benefits since before May 1997 will see their first check of the year on January 3, 2025. Meanwhile, Supplemental Security Income (SSI) benefits typically paid on the first of the month will be distributed on December 31, 2024, due to New Year’s Day being a federal holiday.
Starting to Collect Social Security Benefits
Eligible workers can begin receiving Social Security benefits at age 62, although doing so results in a reduced monthly payment compared to waiting until full retirement age.
| Year of birth | Social Security full retirement age |
|---|---|
| 1943-1954 | 66 |
| 1955 | 66 and two months |
| 1956 | 66 and four months |
| 1957 | 66 and six months |
| 1958 | 66 and eight months |
| 1959 | 66 and 10 months |
| 1960 or later | 67 |
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