What is the 2025 Cost-of-Living Adjustment (COLA)?
For 2025, the Social Security Cost-of-Living Adjustment (COLA) is 2.5%. This adjustment is applied annually to help Social Security benefits keep pace with inflation. The 2025 COLA is smaller than the 3.2% increase in 2024, reflecting a cooling in inflation during the calculation period. Beneficiaries began receiving this increase with their January 2025 payments.
How the 2025 COLA was calculated
The Social Security Administration (SSA) calculates the COLA each year based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The calculation involves comparing the average CPI-W from the third quarter (July, August, and September) of the previous year to the average for the same period in the current year. The resulting percentage change determines the COLA for the following year. The 2.5% increase for 2025 was determined by the rise in the CPI-W during the relevant period.
Estimated monthly benefit increases for 2025
The 2.5% COLA for 2025 resulted in an estimated average monthly increase of $49 for retired workers. This brought the average monthly benefit for a retired worker to $1,976, up from $1,927 in 2024. The COLA impacts different types of beneficiaries, with the specific increase depending on the individual's benefit amount. For example, a married couple receiving benefits saw their average monthly payment increase to $3,089 from $3,014.
Comparing average monthly benefits (2024 vs. 2025)
| Beneficiary | Average Monthly Benefit (2024) | Average Monthly Benefit (2025) |
|---|---|---|
| Retired Worker | $1,927 | $1,976 |
| Married Couple (both receiving) | $3,014 | $3,089 |
| Aged Widow(er) alone | $1,788 | $1,832 |
| Disabled Worker | $1,542 | $1,580 |
Other notable Social Security changes for 2025
In addition to the COLA, other Social Security rules were adjusted for 2025 based on national wage trends. These changes include:
- Taxable Maximum: The maximum amount of earnings subject to Social Security tax increased to $176,100 from $168,600.
- Earnings Limits: The earnings test for beneficiaries who have not reached full retirement age was adjusted. For those under full retirement age all year, the limit increased to $23,400. For those reaching full retirement age in 2025, the limit rose to $62,160.
- Work Credits: The amount needed to earn one Social Security credit in 2025 is $1,810 in wages or self-employment income, an increase from $1,730 in 2024.
- Full Retirement Age (FRA): For individuals born in 1959, the full retirement age is 66 years and 10 months.
How to view your new benefit amount
Social Security beneficiaries usually receive a notice in December detailing their new benefit amount for the upcoming year. To access this information sooner, individuals with a personal my Social Security account can view their notice online starting in early December.
Impact and beneficiary reactions
The 2.5% COLA for 2025 is the smallest increase in several years and lower than the 3.2% COLA in 2024. While helpful, some retirees felt this increase was insufficient to cover rising costs for essential expenses like healthcare, food, and housing. A portion of the COLA increase was also absorbed by higher Medicare Part B premiums for many beneficiaries. This situation highlights ongoing discussions about whether the CPI-W accurately reflects the inflation experienced by older Americans.
Conclusion
The Social Security retirement increase for 2025 is 2.5%, based on the cost-of-living adjustment. This COLA, announced in late 2024, led to an average monthly increase of about $49 for retired workers, with payments starting in January 2025. Other changes for 2025 include increased earnings limits and taxable maximums. While the increase provides some relief, many beneficiaries continue to face challenges from rising costs. For specific benefit information, checking your my Social Security account online is recommended.
