Social Security payments to rise 2.5% in 2025 after COLA increase

The Social Security Administration announced that it’s raising benefits to recipients by 2.5 percent in 2025. The cost-of-living adjustment (COLA) will apply to nearly 68 million people who receive Social Security and nearly 7.5 million who receive Supplemental Security Income. With the increase, the average Social Security monthly benefit check will rise by about $50.

The COLA for 2025 is the second straight year of more normal annual adjustments, following large increases seen in 2023 and 2022. The 2025 increase follows this year’s rise of 3.2 percent, which came after an 8.7 percent jump for 2023, the largest increase since 1981.

Besides the increase in benefits, the government agency also announced that it was raising the level of wages subject to Social Security taxes, known as the taxable minimum. In 2025, Social Security will tax wages up to $176,100, up from $168,600 in 2024. The change takes effect in January 2025, though the tax rate on those wages, 6.2 percent, will remain the same.

After a period of high inflation over the last couple of years, the increased benefits allow retirees and others who depend on Social Security to replace their purchasing power. At the same time, the higher taxable minimum means that higher earners will pay more taxes to fund the program.

“Inflation took a financial toll this past year, particularly on retirees, who often rely on Social Security as a key source of income,” said AARP CEO Jo Ann Jenkins in a statement. “Even with this adjustment, we know many older Americans who rely on Social Security may find it hard to pay their bills.”

Social Security recipients will be notified in December about the exact amount of their new benefit check, and they can turn to their Social Security account for further details, too.

How the 2025 COLA compares to recent adjustments

As of August 2024, the average Social Security recipient received a monthly benefit of $1,783.55. But the average retired worker did a bit better, receiving a check of $1,920.48.

What could the average recipient receive in 2025? The COLA is based on the Consumer Price Index for urban wage earners and clerical workers, known as the CPI-W. With the increases for 2025, the average benefit overall would rise to $1,828.14, while the average retired worker would receive $1,968.49.

The table below shows the increases over the last decade in the year they took effect.

Source: Social Security Administration

While the announced increase for next year wasn’t as high as this year’s, it’s still better than what Social Security recipients received over many of the last ten years. And it’s important to know the program does not announce a decrease in payments, but rather does not increase payments for a given year, as in 2016.

Bottom line

This year’s Social Security COLA offered seniors and others a slightly better-than-usual increase to their payouts, though the downside is that everyone had to endure high inflation to get it. If you’re considering filing for Social Security, you’ll want to carefully plan for when to take it, since your age is one of the biggest factors in your total payout. You could earn tens of thousands of dollars more by claiming at the right age. Here’s how to estimate your Social Security benefits.