In January 2025, over 72.5 million Americans will see an increase of 2.5% in their Social Security benefits and Supplemental Security Income (SSI) benefits. This increase is expected to help individuals keep up with expenses, especially as inflation rates begin to taper off. Social Security retirement benefits are projected to increase by an average of about $50 per month starting in the new year. The cost-of-living adjustment (COLA) for Social Security beneficiaries will begin in January 2025, affecting nearly 68 million recipients, while the increased payments for almost 7.5 million SSI recipients will start on December 31, 2024.
According to Martin O’Malley, the Commissioner of Social Security, the adjustments in benefits for 2025 will provide substantial financial relief to millions of Americans. The average benefit for retired workers is $1,976 per month, with the maximum benefit being $4,018 per month for those retiring at full retirement age. Social Security benefits increase by a certain percentage for each month an individual delays starting their benefits beyond full retirement age. For those born in 1943 or later, the increase is 2/3 of 1%, prompting many workers to wait until age 70 to collect benefits.
Social Security benefits are funded by Social Security taxes, which are collected throughout a person’s working life. Wage earners pay Social Security tax at a rate of 6.2% as employees, while self-employed individuals are responsible for paying both parts of the tax. These taxes are credited toward retirement benefits, with a wage cap set at $176,100 for 2025. The amount an individual receives in benefits is based on their earnings history, with most people needing 40 credits to qualify. The earnings limit for individuals below full retirement age will increase to $23,400 annually in 2025.
Current Social Security beneficiaries will receive notices in early December with their new individual benefit amounts for 2025. Individuals can monitor their earnings record and estimate their benefits by creating a personal Social Security account online. It is recommended to review earnings records annually to ensure accurate crediting, as missing information can impact future benefits. The FBR for SSI in 2024 is $943 per month for individuals and $1,415 for couples, with additional state supplements available in some states. SSI benefits are not taxable at the federal level.
Social Security determines annual COLA increases based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, as determined by the Department of Labor’s Bureau of Labor Statistics. The average increase in COLA over the last decade has been around 2.6%, with a 3.2% increase in 2024. Information about Medicare changes for 2025 will be available on the Medicare website. Recipients with online accounts will receive notices detailing new rates in late November, while those without online accounts will receive COLA notices by mail in December.
In conclusion, the 2.5% increase in Social Security benefits and SSI payments for 2025 will offer relief to millions of Americans to help them cope with rising expenses. The adjustments in benefits will impact various recipients, including retired workers and individuals with limited income and resources. Individuals are encouraged to review their earnings records and stay informed about changes in benefit amounts to ensure they receive the maximum financial support available through Social Security and SSI programs.
