The Social Security Administration (SSA) has officially announced a 2.5% cost-of-living adjustment (COLA) for 2025. This increase will affect more than 72 million beneficiaries, including retirees, survivors, disabled individuals, and recipients of Supplemental Security Income (SSI). Starting in January 2025, beneficiaries will see their monthly checks increase by an average of $48.
SSI beneficiaries will receive their increased payments on December 31, 2024, as January 1st falls on a holiday. Other changes for 2025 include:
– The taxable minimum will increase to $176,100. – The earnings cap for employees will rise to $23,400, with a $1 deduction from benefits for every $2 earned over this amount.
– For those reaching full retirement age (FRA) in 2025, the earnings cap will be $62,160, with a $1 deduction for every $3 earned over this limit until FRA is reached.
Social security beneficiaries’ 2025 COLA changes
– Employees aged 67 or older have no earnings cap.
Beneficiaries will receive their COLA notices through their Social Security accounts’ Message Center. For the first time, most will receive a revised, one-page notice that includes exact dates, cash amounts, and any deductions in a simplified format. It is important for beneficiaries to notify the SSA of any changes in their pensions or life events, such as marriage, divorce, or the death of a spouse, as these may impact benefit eligibility.
Additionally, Medicare Part B premiums will increase to $185 per month in 2025, with an annual deductible of $257. Higher-income beneficiaries may face income-related adjustment amounts that further increase their monthly premiums. Beneficiaries should also consider their tax withholdings and reassess their incomes, as changes may lead to a larger portion of their Social Security benefits being taxed.
Proactive tax planning can help minimize the tax impact.
