The Social Security Administration announced a 2.5% cost-of-living adjustment (COLA) for 2025. This increase is designed to help monthly benefits keep up with inflation. The COLA is based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
This index measures inflation in various spending categories, such as food, housing, transportation, and medical expenses. The COLA for the following year is determined by the average year-over-year increase in the CPI-W during the third quarter. Since the COLA is percentage-based, the increase will depend on the amount retirees were already receiving.
For example, the average Social Security retirement benefit in October was $1,924. With the 2.5% COLA, the average check will rise by $48. This brings the total benefit to $1,972 starting in January.
However, many retirees won’t see the full COLA increase in their monthly checks due to deductions. This is particularly true for Medicare Part B premiums. In 2025, the monthly Part B premium will increase by $10.30 to $185.
Changes to retirement benefits in 2025
This applies to individuals with annual incomes below $106,000 and couples below $212,000. Those with higher incomes may face higher premiums.
This effectively reduces the apparent benefit of the COLA to $38 for the average beneficiary. Another change coming in 2025 is a higher full retirement age. This marks the age at which workers become eligible to claim 100 percent of their retirement benefit based on their lifetime earnings.
The full retirement age has been steadily increasing by two months for each subsequent birth year. Recipients born between May 2, 1958, and Feb. 28, 1959, will all reach the full retirement age in 2025.
Workers can elect to start receiving benefits as early as 62, albeit at a reduced amount. Those who can wait until 70 to start taking benefits will receive the maximum benefit. Other Social Security changes coming in 2025 include an increase in maximum taxable earnings from $168,000 to $176,100.
There will also be the introduction of appointment-based services at Social Security offices nationwide.
