In America, Social Security is an income that is provided by the government to its people when their income is stopped or terminated. Starting in January 2025, the beneficiaries of Social Security can expect an increase in their monthly check amounts because of the Cost Of Living Adjustment or COLA, which was announced by the SSA in October. Though the changes will be reflected in a person’s social security account next year, but the payments will be made for December 2024.
It is said that this annual adjustment is designed by the government so that the benefits could match the rising costs. Though the increase is much smaller than some people might have expected, but it surely will bring a boost in the monthly payments for those receiving these benefits. The SSA’s Office of Retirement and Disability Policy estimated that in 2022 a total of 70.6 million people have social security, which shows an addition of 5.6 million new beneficiaries. So, in this article, we will discuss everything about the 2025 COLA and how much will be the increase.
How Much Is The 2025 COLA Increase?
The Social Security Administration, which is responsible for the Social Security Benefits, has announced that the 2025 cost of living adjustment will see a 2.5% increase. Since the year 2021, this is the smallest annual increase in the monthly checks. According to the administration’s fact sheet, the COLA 2025 will add less than $60 to each person’s monthly social security check. Further, every fall, the administration announces a cost of living adjustment based on the consumer price index for urban wage earners and clerical workers.
Basically, the CPI-W tracks the change in prices which is paid by a worker for a given product, during the 3rd quarter of the year. Recently, some old citizens of America have stated that the yearly COLA given by SSA is not meeting their financial needs, although inflation has gone down since it reached its highest point in 2022. According to these senior citizens, the CPI-W only keeps track of spending by the workers. It does not track the spending done by senior citizens on expensive health care.
How Will The Increase Change The Social Security Benefit?
It is said that the 2.5% cost of living adjustment will bring an increase of about $50 in the monthly social security benefit, starting in January 2025. The average monthly social security benefit for the retiring population, in 2024 is approximately $1927 but after the COLA increase, the amount will change to $1976 each month. Now, married couples who jointly receive Social Security benefits will get about $3089 every month, which is slightly higher than $3014 from the previous year. The administration has said that roughly, 68 million will be receiving this benefit, starting from January 2025. The remaining 7.5 million people, who get the Supplemental Security Income, will begin receiving their money from 31st December 2024.
When Will People Start Receiving Their 2025 COLA Increase?
As mentioned above, the beneficiaries will begin receiving the 2025 cost of living adjustment increase which is 2.5%, in the month of January next year. However, the precise dates of receiving the money might vary because the monthly payment dates are based on a recipient’s birthdate. According to the administration, if a person is born between 1st-10th of any month, then they will receive the COLA increase on 8th January 2025. If a person is born between 11th-20th of any month, they will be receiving the benefit on 15th January 2025.
Lastly, if a person is born between 21st-31st of any month, they will get the amount on the 22nd of January 2025. Further, any person who began receiving the social security benefit before May 1997 or gets both social security and supplemental security income, will be receiving the amount on 3rd January 2025. The administration has also said that everybody who receives SSI will get the above-mentioned benefit along with their 31st December 2024 payment.
Does Social Security Cost Of Living Adjustment Have Any Impact?
An advocacy group president named Nancy Altman has recently stated that the annual cost of living adjustment is one of the essential features of social security because it is intended to ensure that the benefits are not wasted. However, according to her, the formula which is used currently to calculate this does not fully meet the needs of the senior citizens. She expressed that the cost of living adjustment should be by another formula called the Consumer Price Index for Elderly Consumers. This formula tracks the price changes of the people who are 62 years old or above. A resident of Florida named Sherri Myers has stated that the COLA increase she will be receiving in the month of January next year will not be helping her in any way. Also, she revealed that the inflation in America has brought her to a point where all her savings have vanished.
How Can The Social Security Beneficiaries Check The Amount?
The social security cost of living adjustment payment will be reflected in the accounts of the people in January 2025. However, if you want to know the exact amount, you do not have to wait until next year, as it can be done in the following ways:-
- You can log into your My Social Security Account and check the amount
- You can also check your email account as the Social Security Administration will be sending you a proper and detailed statement in the month of December.
Will The Current Workers Have To Pay More Taxes In 2025?
The announcement for the 2025 cost of living adjustment was followed by another announcement that directly affects the current workers, specifically those who earn massive amounts of money per year. The administration has revealed that the amount of taxable maximum or the maximum amount of income that is subject to social security tax will increase to $176,100 in 2025. In 2024, this amount was $168,600. This has been done because of growing inflation and wages.
However, it is also said that the more you pay into the social security taxes, the more benefits you receive later. This means that if the taxable maximum goes up in the next year, people will receive more benefits. Currently, the social security tax rate is 6.2%, which is paid by both employers and employees separately. So, if they make $176,100, they will be paying an extra sum of $465 to the SSA. Any income, which is earned by both above this amount will be exempt from taxes.
