More than 72 million Americans and legal residents, who have made the respective payment of their Social Security taxes, enjoy the monthly payments for being retired, or for being recipients of the Social Security Disability Insurance (SSDI), or Supplemental Security Income (SSI). Since most depend on this income to cover all their living expenses, each change can impact them for better or worse, and they should always be informed of them.
In 2025, five key changes will mark the program, prioritizing the cost of living adjustment (COLA), modifications to taxable limits and improvements to benefits. Below, we present you, organized from the most significant to the least impactful, all those changes.
Cost of Living Adjustment (COLA) Increase for 2025
Let’s briefly review these five changes that will mark a before and after in the lives of those millions of beneficiaries. Since 1975, SSA has applied the cost of living adjustment (COLA) based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
This index measures inflation by comparing the values of the third quarter of the previous year with those of the current year. The percentage change determines the adjustment, ensuring that benefits remain in line with the cost of living.
The most anticipated change is the increase in COLA, which in 2025 will be 2.5%. This adjustment means that retirees will see an average increase of $50 in their monthly payments. For example, the average benefit for retired workers will go from $1,927 to $1,976 per month. For couples receiving both benefits, the average will increase from $3,014 to $3,089.
Increase in maximum taxable earnings and increases in maximum benefits for Social Security retirees
In 2025, the maximum income subject to Social Security tax will rise from $168,600 to $176,100. This means that a larger portion of workers’ salaries will be subject to Social Security tax, which remains at a rate of 6.2%. This change reflects the increase in average wages in the United States, ensuring greater revenue to support the program.
The maximum Social Security benefit for a worker who retires at full age (67 for those born after 1960) will also see a significant increase. This will go from $3,822 per month in 2024 to $4,018 in 2025.
Keep in mind that if you choose to retire before full age you will receive a reduced amount, while those who delay their retirement will be able to increase their maximum benefit. It all depends on your financial leeway and how long you can wait to start processing your retirement.
Finally, the improvement in average benefits for spouses and disabled workers was also announced. The increases not only affect retirees, but also other groups of beneficiaries. For example:
- Widows with two children: They will see an increase in their monthly benefits from $3,669 to $3,761.
- Older Widows and Widowers: Your average payments will increase from $1,788 to $1,832.
- Disabled workers with spouse and children: Average benefits will rise from $2,757 to $2,826.
Thanks for read.