The Social Security Administration (SSA) has officially announced a new Cost-of-Living Adjustment (COLA) for 2025. This adjustment, which aims to help Social Security and Supplemental Security Income (SSI) beneficiaries keep up with inflation, will take effect with benefits payable from January 2025.
The COLA for 2025 is expected to impact millions of Americans, providing them with increased monthly payments to better cover the rising costs of essential goods and services.
What is the Cost-of-Living Adjustment (COLA)?
The Cost-of-Living Adjustment is an annual adjustment applied to Social Security benefits to ensure they reflect changes in the cost of living. COLAs are calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
The formula compares the average CPI-W for the third quarter of the previous year to the same period in the current year.
How is the 2025 COLA Calculated?
For the 2025 COLA, the SSA compared the average CPI-W from the third quarter of 2023 to the average CPI-W from the third quarter of 2024.
The CPI-W for the third quarter of 2023 was 301.236, compared to the base average of 291.901 for 2022. This resulted in a 3.2% increase, which will be reflected in benefits starting January 2025.
Impact of the 2025 COLA on Benefits
The 3.2% COLA for 2025 will affect various types of Social Security benefits, including retirement, survivor, disability, and SSI payments. Here’s a breakdown of how this adjustment will impact the average monthly payments for beneficiaries:
| Benefit Type | 2024 Average Monthly Payment | 2025 Estimated Average Payment |
|---|---|---|
| Retirement | $1,900 | $1,961 |
| Survivor | $1,505 | $1,553 |
| Disability | $1,537 | $1,586 |
| SSI (Individual) | $943 | $973 |
| SSI (Couple) | $1,415 | $1,461 |
Changes to SSI Payments
SSI payments will also see an increase due to the COLA adjustment. For individuals, the federal payment standard will rise to approximately $973 per month, and for couples, it will increase to around $1,461 per month.
Other Key Changes and Considerations
- Earnings Limit: The earnings limit for people under full retirement age will be adjusted to $22,320. If you exceed this amount, $1 will be deducted from your benefits for every $2 earned over the limit.
- Full Retirement Age Earnings Limit: For those reaching full retirement age in 2025, the earnings limit will be $59,520, with $1 deducted for every $3 earned above this limit until reaching full retirement age.
- Medicare Changes: The Inflation Reduction Act will expand the Extra Help Program in 2024, helping people with Medicare qualify for more prescription drug savings. The Medicare Savings Programs will also assist in paying premiums and out-of-pocket costs for those with limited income.
Conclusion
The 3.2% COLA for 2025 will provide some relief to Social Security and SSI beneficiaries, helping them cope with the rising costs of essential goods and services.
While the increase may seem modest, it is a crucial adjustment that ensures the financial support provided by Social Security keeps pace with inflation.
FAQs
The COLA for 2025 is a 3.2% increase in Social Security and SSI benefits, effective from January 2025.
The COLA is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of the current year compared to the third quarter of the previous year.
All Social Security and SSI beneficiaries will see an increase in their monthly payments starting in January 2025.
For individuals, the federal payment standard will increase to around $973 per month, while for couples, it will rise to approximately $1,461 per month.
The increased payment will be reflected in the Social Security and SSI benefits starting January 2025.