Beginning in 2025, individuals receiving Social Security will experience a 2.5% rise in their benefits. This adjustment for the cost of living (COLA) marks the smallest increase since January 2021, which had a 1.3% adjustment. On average, beneficiaries can expect an additional $50 each month.
Starting in early December, recipients will receive notifications about their updated benefits by mail, with the enhanced payments commencing in January. Recipients of Supplemental Security Income (SSI) will also benefit from higher payments, which are expected to take effect on December 31. SSI offers monthly support to both children and adults whose income falls below designated financial thresholds and who qualify for Social Security benefits.
The taxable maximum—representing the highest earnings subject to the Social Security tax—will rise from $168,600 to $176,100. This figure is revised annually in accordance with changes in the national average wage index. Furthermore, the earnings limit for workers under the age of “full” retirement will go up to $23,400.
Details of the cost-of-living adjustment
For individuals reaching their “full” retirement age in 2025, the earnings limit will be $62,160. In 2025, the full retirement age is established at 66 years and 10 months.
These modifications illustrate ongoing efforts to adjust benefits and financial limits in line with economic trends. However, the situation with Social Security’s cost-of-living adjustments is more complex than it appears. In 2023, retirees received the largest COLA increase since 1982, along with a reduction in the Medicare Part B premium.
This year, retirees face more challenging conditions. New Alzheimer’s disease treatments are once again driving up Part B premiums considerably. Following a 5.9% increase in monthly premiums for 2024, the Centers for Medicare and Medicaid Services has recently confirmed an additional 5.9% hike, raising the monthly premium from $174.70 to $185.00 for the coming year.
While this latest increase is more manageable compared to the 14.5% spike in 2022, it still exceeds the 2.5% cost-of-living adjustment slated for beneficiaries in January. A significant portion of next year’s COLA will be diminished by the escalating Part B premium for the majority of retirees, thereby impacting their essential benefits for the second consecutive year.
