The Social Security Administration (SSA) has announced that Social Security benefits will increase by 2.5% in 2025 due to the cost-of-living adjustment (COLA). This adjustment helps maintain the purchasing power of retirees, survivors, Social Security Disability Insurance (SSDI), and Supplemental Security Income (SSI) beneficiaries. However, the Social Security Board of Trustees’ annual report reveals significant funding problems for the Social Security and Medicare programs.
If not resolved, these issues could lead to incomplete payments in the near future. The Old-Age and Survivors Insurance (OASI) Trust Fund is projected to pay 100% of benefits only through 2033. After that, ongoing revenues will cover just 79% of benefits.
The Disability Insurance (DI) Trust Fund is expected to pay 100% of benefits through at least 2098.
Social Security benefits increase in 2025
The Hospital Insurance (HI) Trust Fund, which includes Medicare, will pay 100% of benefits through 2036.
Once its reserves are depleted, ongoing revenues will only cover 89% of total benefits. The Supplementary Medical Insurance (SMI) Trust Fund faces no funding issues, as it is primarily funded by beneficiary premiums and federal contributions. To address these financial deficits, lawmakers in Congress have several options.
They could raise the payroll tax rate, increase wages subject to Social Security contributions, raise the full retirement age, or reduce annual COLAs. Although the funds will not be depleted for several years, it is crucial for the government to start implementing measures to prevent this from happening. The future of Social Security and Medicare depends on taking action now to ensure these vital programs remain solvent for generations to come.
