Social Security
The Social Security Administration (SSA) has announced a 2.5% cost-of-living adjustment (COLA) for 2025 today. This decrease from the 2024 increase of 3.2% reflects slower inflation compared to the prior years.
Retirable
Published October 10th, 2024
Retirable
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Published October 10th, 2024
Table of Contents
Key Takeaways
In 2025, Social Security beneficiaries will receive a 2.5% COLA increase, reflected in payments starting in January.
The adjustment will increase the average monthly retirement benefit from $1,927 to $1,976.
Medicare Part B premiums might offset some of the COLA increase, depending on individual circumstances.
The Social Security Administration (SSA) has announced a 2.5% cost-of-living adjustment (COLA) for 2025 today. This decrease from the 2024 increase of 3.2% reflects slower inflation compared to the prior years.
Understanding the 2025 Social Security Cost-of-Living Adjustment (COLA) Increase
The cost-of-living adjustment (COLA) is determined based on an average of the inflation readings for July, August, and September, as shared by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), published by the Bureau of Labor Statistics.
The chart below provides details on the 2025 COLA calculation:
| Time Period | CPI-W 2023 | CPI-W 2024 | Difference |
|---|---|---|---|
| July | 299.899 | 308.501 | 2.9% |
| August | 301.551 | 308.640 | 2.4% |
| September | 302.257 | 309.046 | 2.3% |
| Q3 Average | 301.236 | 308.729 | 2.5% |
The CPI data represents the current costs, as compared to previous costs, of a range of goods. This “basket of goods” includes 200 everyday consumer items grouped into the following categories:
- Housing: rent, phone service, fuel oil, electricity
- Food and beverages: bread, chicken, coffee, cereal
- Clothing: t-shirts, dresses, jewelry
- Transportation: airline fares, gas prices, car insurance
- Medical care: prescription drugs, eye care, hospital rooms
- Recreation: movie tickets, musical instruments, video game consoles
- Education and communication: newspapers, textbooks, cell phones
- Other goods and services: haircuts, college tuition, bank fees
- The Bureau of Labor Statistics website provides a complete description of the categories and contents.
What Does the 2.5% Increase Mean for You?
Monthly Benefits Impact
- Retirement Benefits: The average monthly retirement benefit will increase by approximately $49, from $1,927 to $1,976.
- Survivor Benefits: The average survivor benefit will rise from $1,788 to $1,832.
- Disability Insurance (SSDI): SSDI recipients will see their benefits increase from $1,542 to $1,580.
Other Impacts on Benefits
The annual COLA adjustment intends to help beneficiaries keep pace with rising costs, but it might only partially match personal inflation, especially for expenses like healthcare.
Medicare Premiums: For beneficiaries enrolled in Medicare, Part B premiums could rise, reducing the effective increase from the COLA. Check your updated premium details at Medicare.gov.
Why COLA Matters
The annual COLA adjustment is crucial for protecting the purchasing power of Social Security benefits. Without it, retirees and other beneficiaries could see the actual value of their benefits eroded over time due to inflation.
Don’t let healthcare costs ruin your retirement.
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Earnings Limits for 2025
For those who are working while claiming benefits before reaching full retirement age (FRA), Social Security imposes an earnings test:
- Under Full Retirement Age: Benefits are reduced by $1 for every $2 earned above $23,400 annually ($1,950 monthly).
- Year of Reaching Full Retirement Age: The limit increases to $62,160 annually ($5,180 per month), and benefits are reduced by $1 for every $3 earned over this limit.
Social Security Tax Cap for 2025
The maximum taxable earnings for Social Security in 2025 will be $176,100, up from $168,600 in 2024. This cap means income above this amount is not subject to Social Security payroll taxes.
Medicare Premiums and Deductibles
While the COLA provides an increase, Medicare Part B premiums often rise simultaneously, potentially offsetting part of the gain. Monitoring your total benefits package to understand the net impact is essential.
Frequently Asked Questions (FAQs)
You asked. We answered.
What is the COLA increase for 2025?
The 2025 COLA increase is 2.5%, resulting in a $49 average monthly boost for retirement benefits. This adjustment reflects lower inflation rates compared to recent years.
When will I see the new COLA reflected in my Social Security check?
The new COLA adjustment will be applied to January 2025 payments. You should see the increase in your benefit amount starting in your January deposit.
Will the Medicare Part B premium increase offset my COLA?
It depends on your specific situation. For some, the rise in Medicare premiums may reduce or completely offset the benefit from the COLA increase. Check your Medicare notice to see your premium details for 2025.
How is the COLA calculated each year?
The COLA is calculated based on the average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of the current year compared to the same quarter of the previous year.
Is the COLA guaranteed to increase every year?
No, the COLA is not guaranteed. If the CPI-W does not increase from one year to the next, there may be no COLA adjustment, as happened in past years like 2016.
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Retirable, the first-of-its-kind holistic retirement solution with the ongoing care of an advisor, offers products and services across the retirement investing, planning and spending spectrum. Retirable was founded by industry veterans to empower a worry-free retirement for everyone.
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Retirable, the first-of-its-kind holistic retirement solution with the ongoing care of an advisor, offers products and services across the retirement investing, planning and spending spectrum. Retirable was founded by industry veterans to empower a worry-free retirement for everyone.
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