The Social Security program is constantly evolving to keep up with the times, and one of the most obvious ways most beneficiaries notice this evolution is the annual increase in their checks caused by the Cost of Living Adjustment (COLA).
Of course, as with everything in life, an increase is not guaranteed because the COLA is linked to inflation, and inflation does not rise every year, but it occurs frequently enough that most recipients have come to expect an increase in their benefits.
This allows them to keep up with inflation and ensures that their benefits don’t lose purchasing power over time. In 2025, the COLA will be 2.5%, a significant decrease from the 3.2% average adjustment in 2024.
Out of context, it is impossible to determine whether or not this benefit increase is sufficient, but given that the average Social Security check is slightly more than $1,900 per month, the increase will be approximately $50 per month.
Given that the cost of living has risen significantly in recent years, and that Medicare Part B premiums will rise by approximately $10 per month, the additional funds may not be sufficient to meet all of the beneficiaries’ needs.
Despite popular belief, benefits are not intended to raise retirees’ standard of living, but rather to maintain it, and the increase is not intended to help retirees save more money in the long run or make them richer; rather, it is intended to help retirees meet rising prices for food, fuel, and other goods and services.
The problem appears to be that because the increase occurs after inflation has been measured and is not retroactive, some retirees will have had to dip into their savings to cover operating costs when inflation was higher, leaving them in a worse position than they were.
Nonetheless, the increase is set in stone, and recipients will be notified of their new benefit via mail beginning in early December, before it is implemented in January.
Other changes to the Social Security program
In 2025, the taxable maximum earnings will rise to $176,100, up from $168,600. This also means that the maximum Social Security benefit will be increased from $4,873 to $5,108 per month. This will only affect a few select beneficiaries, but all benefits will be increased by the 2.5% COLA established.
The increase is not limited to retirement benefits; disability payments, survivor and family benefits, and Supplemental Security Income payments will all increase by the same amount. Beneficiaries of Supplemental Security Income payments should be aware that their first benefit for 2025 will be paid early, on December 31st, to account for the New Year’s holiday.
Even though the payment will technically arrive in 2024, the increase will have been applied to the check, and the new amount will be deposited into your bank account.
The final significant change will be to the earnings test limit, which applies to workers who also receive Social Security benefits. There are two limits: one for workers who have not yet reached full retirement age, and another for those who will reach full retirement age in 2025.
- The earnings limit for workers who are younger than “full” retirement age will increase to $23,400.
- The earnings limit for people reaching their “full” retirement age in 2025 will rise to $62,160.
All these changes are important and will affect retirees, so it is important to take them into account when making plans for retirement. For any question regarding your benefits, you should visit the SSA’s website, and you will have all the information pertaining to the topic ready for you.
