Social Security checks for most beneficiaries will be 2.5% bigger in 2025, the Social Security Administration announced Thursday. But the program's 2025 cost-of-living adjustment, or COLA, is less than 2024's 3.2% hike and 2023's inflation-driven 8.7% raise.
Some 72 million Americans receive Social Security checks. The 2025 Social Security COLA will boost a retired worker's average monthly benefit by about $50, to $1,920, starting in January, the Social Security Administration (SSA) said.
Some other adjustments that take effect in January of each year track the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $176,100 from $168,600.
How Important Is Social Security To Retirees?
About half of the U.S. workforce has no employer-provided retirement plan, AARP says in a recent Social Security analysis.
More than a third of working households aged 21 to 64 have no individual savings set aside for retirement. Some 44% of those ages 55-64 – on the edge of retirement – have no retirement savings. Even those households aged 50 to 59 with retirement savings do not have enough, AARP reports. And over 60% have less than $100,000.
The Future Of Social Security And Medicare
Each year, the Social Security and Medicare Boards of Trustees report on the current and projected financial status of the two programs.
Based on the boards' best estimates, this year's reports show that:
- The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100% of total scheduled benefits until 2033, unchanged from the 2023 report. At that time (2033), the fund's reserves will be depleted and continuing program income will only pay 79% of scheduled benefits.
- The report projects the Disability Insurance (DI) Trust Fund will be able to pay 100% of total scheduled benefits through at least 2098, the last year of this report's projection period.
According to the AARP report, Social Security collected more in taxes and interest than it paid out in the years prior to 2021. It built up a surplus to support the boomer generation's retirement. "Today, that surplus is being used to supplement incoming payroll tax income, but eventually the trust funds will face a shortfall," the analysis said.
How Social Security COLAs Are Calculated
The 2025 announced Social Security COLA is spot on the amount the The Senior Citizens League (TSCL), a nonpartisan seniors group, predicted last month.
TSCL expected the Social Security COLA for next year would be 2.5%, based on a decline from 2.9% to 2.5% in recent consumer price data.
"While 2.5% is lower than the 3.2% received in 2024, that wouldn't be far from the historical norm. The COLA has averaged about 2.6% over the past 20 years. It went as low as 0.0% in 2010, 2011, and 2016 and as high as 8.7% in 2023," TSCL said.
The Labor Department said Thursday morning that the Consumer Price Index rose 0.2% in September, with an annual rise of 2.4%. Analysts expected it would rise 0.1% for the month of September, with an annual increase of 2.3%, according to Econoday.
Excluding food and energy, core CPI increased 0.3% on the month, with a year-over-year increase of 3.3%. The forecast was for a 0.2% increase on the month, with a year-over-year rise of 3.2%.
Further, weekly initial unemployment claims jumped to 258,000 vs. 225,000 in the previous week. Forecasts were for it to edge higher to 226,000.
How Much Do Retirees Spend Per Month In 2024?
In TSCL's 2024 Retirement Survey, 65% of older adults reported monthly expenses of at least $2,000. That's up from 55% in 2023. The survey also says low-income seniors aren't the only ones who have seen their expenses rise. More older adults are spending at least $4,000 to $6,000 per month compared to 2023. And fewer are able to get by on $1,000 or less.
"Ensuring that seniors have enough to feed and house themselves with dignity is a major reason why we advocate for a minimum Social Security COLA of 3%," said Shannon Benton, TSCL's executive director. "TSCL research shows that approximately two-thirds of seniors rely on Social Security for more than half of their monthly income, and 28% depend on it entirely."
