Weekend Read: Social Security Announces 2.5% Benefit Increase for 2025
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In 2025, Social Security recipients will see a modest boost to their monthly payments. The Social Security Administration has announced a 2.5% cost-of-living adjustment (COLA) for Social Security benefits1.
What Does the 2.5% Increase Mean for You?
Starting in January 2025, nearly 68 million Social Security beneficiaries will receive an average increase of about $50 per month1.
This year’s COLA is slightly below the 10-year average of 2.6%, and it’s down from the 3.2% increase in 2024 and down significantly from the 2023 8.7% increase. As inflation continues to cool, these smaller adjustments are expected and if you’re looking to see the good in this, it should reflect a more stable economic environment—though costs remain higher than pre-pandemic levels.
The Impact of Rising Wages
In addition to the benefit increase, higher average wages are triggering a change in the maximum amount of earnings subject to Social Security tax. In 2025, the taxable maximum will rise to $176,100 from $168,6001. This adjustment means higher earners will contribute more to the Social Security system. I wrote an entire piece explaining the issues with SS running out of money and this small increase will accomplish very little in the long run. You can read that more detailed article here if you’d like.
Your COLA Notice
For those who prefer to see their personal increase electronically, setting up an account at the Social Security website is the way to go. This online portal allows you to view your COLA notice and other important updates faster than waiting for mail. If you want to take advantage of this, make sure to create your account by November 20 to see your 2025 COLA notice online. That notice should be available in December and there you’ll be able to see what your actual increase will be.
What About Medicare?
Changes to Medicare premiums for 2025 will be available at www.medicare.gov later this year. If you’re enrolled in Medicare and receiving Social Security, you’ll be able to view your updated benefit amount, reflecting any Medicare deductions. It is possible, that the increase in medical costs might offset any increase in benefit that actually makes it to your pocket.
Just for some perspective, over the past few years, the relationship between Social Security COLA increases and Medicare Part B premium changes has varied significantly. In 2023, inflation pushed the COLA to a massive 8.7%, the highest in decades, but Medicare premiums surged 14.5%, jumping to $170.10. This larger-than-usual increase took a bigger bite out of that benefit boost. Then, in 2024, and we saw a bit of relief. While the SS COLA increased at 3.2%, Medicare premiums actually decreased by 3.1%, dropping to $164.90. Looking ahead to 2025, Social Security benefits will see a modest 2.5% increase, but Medicare premiums are expected to rise although to what extent we don’t know2,3.
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1https://www.ssa.gov/news/press/releases/2024/#2024-10-10
2https://www.ssa.gov/oact/cola/colaseries.html
3https://www.medicareresources.org/medicare-benefits/medicare-part-b/
AdTrax 7174488.1 Exp 10/25