Social Security Announces 2.5% Benefit Increase and New Wage Base for 2025

The Social Security Administration (SSA) has announced several key changes for 2025, including a cost-of-living adjustment (COLA) and an increase in the wage base limit. Starting in January 2025, Social Security and Supplemental Security Income (SSI) benefits will increase by 2.5% due to the annual COLA, which is tied to inflation. This adjustment follows a 3.2% increase in 2024 and a significant 8.7% increase in 2023.

The wage base limit for Social Security taxes will rise to $176,100 in 2025, up from $168,600 in 2024. This means that individual taxable earnings up to $176,100 will be subject to the 6.2% OASDI tax. Both employees and employers will each pay $10,918.20 in tax, an increase of $465 from the previous year. The Medicare hospital insurance tax of 1.45% for both employees and employers remains unchanged and has no wage limit.

For retirees, the earnings limit before benefits are reduced will also increase. In 2025, retirees can earn up to $62,160 in the year they reach full retirement age before their benefits are reduced by $1 for every $3 in earnings over the limit, up from $59,520 in 2024. Beneficiaries younger than full retirement age can earn up to $23,400 in 2025 before their benefits are reduced by $1 for every $2 in excess earnings, an increase from $22,320 in 2024.

The maximum Social Security benefit for a worker retiring at full retirement age will increase to $4,018 per month in 2025, up from $3,822 in 2024. Additionally, SSI payments will see an increase, with the maximum federal benefit rising to $967 per month for individuals and $1,450 per month for couples, effective December 31, 2024.

The SSA will begin notifying beneficiaries of their new benefit amounts by mail in early December, using a new simplified format that includes exact dates, dollar amounts, and details about any deductions on a single page. This information will also be available online for individuals with an account on the Social Security website).