As inflation continues to influence financial planning, the Social Security Administration (SSA) is poised to announce its cost-of-living adjustment (COLA) for 2025 on October 10, 2024. This adjustment is essential for nearly 68 million Americans who depend on Social Security benefits, totaling around $1.5 trillion annually.
What is the Social Security COLA?
Since 1975, the SSA has implemented annual COLA to ensure that Social Security benefits keep pace with inflation, calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). In recent years, following the significant inflationary pressures stemming from the pandemic, these adjustments have seen noticeable increases:
- 2021: 1.3%
- 2022: 5.9%
- 2023: 8.7%
- 2024: 3.2%
While a static adjustment is rare, there have been instances, such as in 2009, 2010, and 2015, when the COLA was 0%. With inflation rates fluctuating, the cumulative increase in the Consumer Price Index has risen by 24.6% since 2021.
Expected Increase for 2025
Predictions for the 2025 COLA suggest a more modest increase of approximately 2.5%, as projected by both the Senior Citizens League and The Center for Retirement Research at Boston College. This figure, if accurate, reflects a reduction from the previous year’s 3.2% increase. According to the U.S. Bureau of Labor Statistics, the inflation rate has been cooling, with the August 2024 CPI report indicating a 2.5% rise in average prices over the past year, marking the smallest increase since February 2021.
If the projected 2.5% COLA holds, it would translate to an average increase of $48 in monthly Social Security benefits, bringing the average check for retired workers to approximately $1,966.
How to Check Your Benefits
Beneficiaries can expect to receive official notices regarding their updated benefits in December, but details will be accessible online via the mySocialSecurity account starting in mid-November. The COLA is calculated based on data collected from July to September of the previous year, directly tied to the CPI-W.
Changes on the Horizon for 2025
For individuals aiming to qualify for Social Security retirement benefits, earning 40 work credits throughout their careers is essential. The requirement for earning credits, based on income thresholds, is expected to increase in 2025. For instance, the threshold for 2024 was set at more than $6,920, which could rise next year.
Furthermore, the cap on annual earnings subject to Social Security tax may also see an increase, with the current cap for 2024 set at $168,600, an increase of $8,400 from 2023.
Read More News:
SSDI Recipients to Receive Four Payments in October 2024: Key Details and Application Process
2024 SSI COLA Increase: Key Details for Beneficiaries
Final Thoughts
Social Security benefits play a crucial role in the financial well-being of many seniors. With nearly half of retirees relying on these payments for at least 50% of their household income, staying informed about adjustments and benefits is vital. To ensure a comfortable retirement, individuals are encouraged to explore options for supplementing their income, such as employer-sponsored retirement accounts or individual retirement accounts (IRAs). For more detailed information about upcoming changes, visit the Social Security Administration’s official website.