The Social Security program is constantly evolving to keep up with the times, and one of the most obvious ways most recipients perceive this change is the annual rise in their checks caused by the Cost of Living Adjustment (COLA).
Of course, as with everything in life, a raise is not guaranteed because the COLA is linked to inflation, and inflation does not climb every year, but it occurs frequently enough that most recipients have grown to expect an increase in their benefits.
This allows them to stay up with inflation and ensures that their benefits don’t lose purchasing value over time. In 2025, the COLA will be 2.5%, a substantial decrease from the 3.2% average hike in 2024.
Out of context, it is impossible to assess whether or not this benefit increase is sufficient, but given that the average Social Security check is little more than $1,900 per month, the increase will be approximately $50 per month.
Given that the cost of living has risen dramatically 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’ demands.
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 difficulty appears to be that because the raise occurs after inflation has been calculated and is not retroactive, some retirees will have had to tap into their savings to fund operating costs when inflation was higher, leaving them in a worse situation than they were.
Nonetheless, the rise is fixed in stone, and recipients will be advised of their new benefit via mail beginning in early December, before it is effective 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 payout will be increased from $4,873 to $5,108 per month. This will only affect a few select recipients, but all benefits will be increased by the 2.5% COLA created.
The rise is not limited to retirement benefits; disability payments, surbifor 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 come in 2024, the increase will have been applied to the check, and the new amount will be deposited into your bank account.
The final substantial adjustment will be to the earnings test limit, which applies to workers who also get Social Security payments. 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 of these changes are significant and will have an impact on retirees; therefore, they must be considered while planning for retirement. If you have any questions about your benefits, go to the SSA’s website and you will get all of the information you need.