Social Security Benefits to Increase by 2.5% in 2025: Here’s What You Need to Know

The Social Security Administration (SSA) has announced a 2.5% cost-of-living adjustment (COLA) for Social Security benefits in 2025. This increase is designed to help retirees and other beneficiaries keep pace with inflation, which dropped to 2.4% in September 2024. For every $100 a retiree received in 2024, they will receive $102.50 in 2025.

The average Social Security retirement benefit will rise from $1,873 per month in September 2024 to $1,919 in 2025. This adjustment will begin with the first benefits payment in January 2025 for most retirees. However, for Supplemental Security Income (SSI) recipients, the increase will start with their last payment in December 2024.

In addition to the COLA, the SSA will also increase the annual income cap subject to Social Security tax. Effective January 2025, earnings up to $176,100 will be subject to the Social Security tax, reflecting the annual adjustment to keep up with inflation. Earnings above this cap are not subject to the Social Security tax.

The COLA is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) by the Bureau of Labor Statistics. This adjustment helps mitigate the impact of inflation on the purchasing power of Social Security benefits over time.

Retirees do not need to take any action to receive the COLA, as the SSA applies the benefit increase automatically each year. Beneficiaries will receive a letter in the mail and can also check their benefits via the mySocialSecurity online portal.