Social Security beneficiaries will see a 2.5% increase in their benefits starting in 2025. This cost-of-living adjustment (COLA) is the lowest since January 2021, which saw a 1.3% adjustment. The average recipient will see an increase of about $50 per month.
Recipients will be notified about their new benefit by mail starting in early December, and the higher payments will begin in January. Supplemental Security Income (SSI) recipients will also see increased payments, which are set to start on December 31. SSI provides monthly payments to adults and children with income below specific financial limits and qualify to receive Social Security benefits.
The taxable maximum—the highest amount of earnings subject to the Social Security tax—will increase from $168,600 to $176,100. This figure is adjusted annually based on changes in the national average wage index. The earnings limit for workers younger than “full” retirement age will increase to $23,400.
Cost-of-living adjustment details
For those reaching their “full” retirement age in 2025, the earnings limit will rise to $62,160. The full retirement age will be 66 years and 10 months in 2025.
These changes reflect ongoing adjustments aimed at aligning benefits and financial thresholds with economic conditions. However, not all is what it seems when it comes to Social Security’s cost-of-living adjustments. In 2023, retired-worker beneficiaries experienced the largest COLA since 1982, alongside a decline in Medicare’s Part B premium.
This year, retirees face less favorable conditions. Next-generation Alzheimer’s disease drugs are once again pushing Part B premiums notably higher. After a 5.9% increase to monthly premiums in 2024, the Centers for Medicare and Medicaid Services recently announced another 5.9% rise, from $174.70 per month to $185.00 per month for the upcoming year.
Although this increase is more palatable than the 14.5% hike in 2022, it still surpasses the 2.5% cost-of-living adjustment beneficiaries will receive in January. A substantial portion of next year’s COLA will be offset by the rising Part B premium for most retirees, eroding their much-needed benefits for the second consecutive year.
