Social Security COLA for 2025: What to Know About the 2.5% Increase

The Social Security Administration (SSA) just announced a 2.5% annual cost-of-living adjustment (COLA) for 2025. But what does that mean in real terms for people who rely on Social Security benefits each month? Well, this annual COLA increase directly affects amounts how much disabled and older Americans receive in monthly Social Security payments. Learn how they calculate each year’s annual adjustment, which Social Security benefits will go up and when below.

The 2025 Social Security COLA: Key Takeaways

• The Social Security Administration just announced a 2.5% cost-of-living adjustment (COLA) for 2025.
• Social Security beneficiaries should start receiving higher payments before the end of January 2025. This includes survivor, spousal, retirement, Security Disability Insurance, and Supplemental Security Income benefits.
• The annual COLA increase is designed to ensure inflation doesn’t erode the purchasing power of Social Security benefits over time.
• Retirement income should go up $48 per month, on average, according to the Social Security Administration. Social Security disability insurance (SSDI) payments will increase $38, on average, starting in January.
• Benefits from the U.S. Department of Veterans Affairs (VA) will also get a 2.5 percent raise. However, the pay amount each veteran gets on a monthly basis depends on your combined VA disability rating.

How the Consumer Price Index Influences Each Year’s COLA

The Consumer Price Index (CPI) measures the average change in prices for consumer goods and services over time. This CPI measurement directly influences each year’s cost-of-living adjustment and reflects the buying habits of two populations:

• Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)
• Consumer Price Index for All Urban Consumers (CPI-U)

These two populations represent more than 90% of U.S. households, according to the Bureau of Labor Statistics (BLS). Federal law says the SSA must use annual inflation rates measured during each July, August, and September to determine the following year’s COLA. If consumer prices for things like healthcare, groceries, and utilities go up compared to the previous period, then the COLA reflects that as a percentage. But some critics say the CPI-W isn’t accurate for tracking annual expenditures by older adults.

The Senior Citizens League, for example, says that the CPI-W fails to accurately represent monthly healthcare expenditures by people over 65. Instead, the non-partisan group advocates for changing the representative audience, along with a minimum annual COLA increase of 3%.

The 2.5% COLA increase for 2025 is smaller than both the 2023 (8.7%) and 2024 (3.2%) raises, indicating that inflation is cooling. The average annual COLA increase has been 2.6% over the past 10 years.

Measuring the 2025 COLA Impact on Social Security Benefits

• Maximum taxable earnings subject to Social Security and Medicare taxes will rise from $168,600 to $176,100 in January.
• Married couples who both collect Social Security at full retirement age will see their average monthly benefit rise to $3,089, up from $3,014 currently. (Full retirement age for anyone born in 1960 or later is now 67.)
• Thinking about retiring early at 62? Do some calculations first. Social Security recipients lose 30% of their benefits by drawing at 62 compared to waiting until 67. Even worse, those benefit reductions are permanent, meaning your Social Security check gets reduced for life. That means the most Social Security money you can get choosing to draw at 62 will be $2,812.60. Average Social Security payments people receive from early retirement at 62 equals $1,383.20 per month in January 2025.
• Close to 68 million Social Security beneficiaries will receive the new COLA for 2025. Including people who receive Supplemental Security Income, the new changes for January will affect approximately 72.5 million Americans.

How the 2025 Social Security COLA Affects Supplemental Security Income

SSI is a federal program that pays disability benefits to adults and children based on financial need, not work history. The government program also pays a monthly benefit to seniors aged 65 and older who meet the income and asset eligibility requirements. Since the SSA also administers this monthly benefit program, here’s what to expect in January 2025:

• Individual Supplemental Security Income (SSI) benefits pay a maximum of $943 per month in 2024. Next year, that maximum SSI benefit goes up to $967.
• Couples who qualify based on joint eligibility will see new maximum monthly SSI payments of $1,450, up from $1,415 for 2024.

Supplemental Security Income funding comes out of the government general tax fund, not Social Security trust money. So, any increased payments have no effect on future payments to Social Security beneficiaries. Some people believe that these payments will deplete the Social Security trust fund, but the two are kept separate under federal law. The confusion likely stems from the fact that the SSA administers payments and conducts claim reviews for the SSI program.

Medicare Policy and Cost Changes for January 2025: What to Know

The 2025 COLA doesn’t just affect Social Security — it also affects Medicare coverage and plan costs. Medicare provides healthcare coverage for older Americans who paid into the system during their working years. Most people cannot enroll in coverage until four months before their 65th birthday, but there is one exception. People awarded Social Security Disability Insurance (SSDI) payments can also get Medicare access after 24 months. There are some big changes on the horizon, thanks to the Biden administration passing its Inflation Reduction Act in 2022. If you’re retired or on SSDI disability benefits and have Medicare, here’s what to expect in the coming year:

• Medicare Part D prescription drugs are capped at a $2,000 limit on out-of-pocket costs starting in January 2025.
• The plan also caps coinsurance costs for covered drugs at 25% until you meet the $2,000 out-of-pocket threshold. After that, you’ll pay nothing else out of pocket for your covered medications through the end of the year.
• The dreaded Medicare “donut hole” is also going away for 2025.
• A new dementia support program from the Center for Medicare and Medicaid Services (CMS) will extend more services to patients and unpaid caregivers nationwide. Learn more about the voluntary, 8-year pilot for the Guiding an Improved Dementia Experience (GUIDE) program here.
• Part D base premium costs will increase to $36.78, just $2.08 more than 2024.

You can get more information on 2025 cost changes by visiting Medicare.gov or calling 1-800-MEDICARE (1-800-633-4227). Deaf or hard of hearing consumers can contact Medicare directly via TTY 1-877-486-2048.

How to Find Your 2025 COLA Notice and Payment Dates from the Social Security Administration

If you have a mySocialSecurity account, look for your Social Security COLA notice in your online Message Center during December 2024. Don’t have an account and still receiving your annual COLA notice by mail? You can opt out of the paper notice by mail in future years by creating a mySocialSecurity account at SSA.gov.

The 2025 COLA notice is a simplified, one-page document that lists the following helpful information:

• Pay dates for every month in the next calendar year. Can’t find your COLA notice? See pay dates for Social Security recipients in 2025 here.
• Exact dollar amount of your new monthly Social Security benefit payment.
• Any Social Security benefit deductions, such as Medicare premiums, garnishments, etc.

Get Free Help Qualifying for Disability Benefits

Want to get the most Social Security money possible before you turn 67? SSDI benefits pay your maximum benefit payment if you must stop working sooner, specifically for health reasons. Older adults who stop working between ages 50 and 66 are most likely to get SSDI. However, the application process is long and difficult. Claim reviews can take at least 7 months, and less than 1 in 3 people who apply ever get SSDI.

Working with an experienced Social Security attorney can make benefit approval much easier compared to filing on your own. You’ll triple your chances of getting your first payment in 6 months, according to a recent GAO study. If a lawyer cannot help you get benefits, then you pay $0 for legal assistance. And if you are successful, then you only pay one small fee out of your final award.

Want to speak to someone who can tell if you qualify for payments before you start an application? Click the button below to start your free online benefits quiz now and see if you may qualify:

Get Your Free Benefits Evaluation