Social Security Beneficiaries to Receive 2.5% COLA Increase in 2025

The Social Security Administration (SSA) has announced a 2.5% cost-of-living adjustment (COLA) for Social Security benefits effective January 2025. This increase, which marks the lowest since 2021, is a result of the declining inflation rate across the country. The 2.5% COLA is a decrease from the 3.2% adjustment seen in 2024.

The adjustment is expected to increase the average retirement payment by $48 monthly, benefiting around 68 million individuals receiving Social Security benefits. The calculation of the COLA is derived from third-quarter inflation figures as indicated by the Consumer Price Index for Wage Earners and Clerical Workers (CPI-W).

There are several key dates to note regarding the 2025 COLA. In early December 2024, the SSA will start notifying beneficiaries about their updated benefit amounts via mail. Beneficiaries with a ‘my Social Security’ account can also access their COLA notice online, provided they establish their account by November 20, 2024.

On December 31, 2024, the 2025 COLA will be incorporated into payments for nearly 7.5 million recipients of Supplemental Security Income (SSI). The first regular Social Security payments reflecting the new COLA will be distributed on January 8, 2025, to recipients whose birthdays are between the 1st and the 10th of the month.

In addition to the COLA, the SSA has announced other changes. The earnings-test limits for 2025 will increase, allowing retirees to earn more without diminishing their benefits. The Social Security wage cap, currently at $168,600 for 2024, is also expected to increase in 2025 based on inflation and wage growth.