2025 Cost-of-Living Adjustment

For the over 72.5 million Americans who receive monthly Social Security and Supplemental Security Income (SSI) benefits, the new year has brought notable change. 

The annual Cost-of-Living Adjustment (COLA) is a yearly calculation to ensure inflation is taken into account when determining monthly Social Security benefits. The 2025 COLA increase is 2.5 percent. 

So how will this year’s COLA affect you? And what other Social Security changes should you be aware of?

How Does the 2025 COLA Compare to Recent Years? 

As stated above, the Cost-of-Living Adjustment (COLA) for 2025 is 2.5 percent. This represents a smaller increase compared to the past few years. In 2024, the COLA was 3.2 percent, 8.7 percent in 2023, and 5.9 percent in 2022. Prior to 2022, the COLA had not exceeded 3 percent since 2011. These unusually high adjustments in recent years were driven by inflation following the COVID-19 pandemic, which caused a sharp rise in consumer prices.

Who Is Affected? 

Nearly 1 in 5 Americans rely on monthly Social Security Benefits and Supplemental Security Income Benefits; with some individuals receiving both. For many Americans who are otherwise unable to work full-time due to qualifiers like age and disability, these payments constitute the bulk of their incomes. So, the 2.5 percent increase is both welcome and crucial for those concerned that the adjustment will not do enough to offset the rising costs of housing, utilities, food, and healthcare. 

How the SSA Calculates Benefits Adjustments 

Social Security’s benefits are calculated annually using a specific set of consumer price index data, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). As a result of the Social Security Act, the annual COLA is contingent upon the Consumer Price Index, and the rise in the CPI-W reflects the 2.5 percent COLA increase.

Although the COLA has been calculated using the CPI-W since 1975, some argue that the yearly COLA should be calculated using different data. They believe that the Consumer Price Index for the Elderly (CPI-E) is better suited to measure the current cost of living for the senior citizen demographic, as retired workers make up nearly 75 percent of Social Security beneficiaries. 

Other Notable Changes to Social Security in 2025

• Quarter of Coverage Increase will increase from $1,730 to $1,810. “You earn a quarter of coverage (QC)—also called a ‘credit’—for a certain amount of work covered under Social Security, but you may earn no more than four QCs per year. Generally, you need to be fully insured to receive Social Security benefits, but there may be other requirements.” See https://www.ssa.gov/oact/progdata/insured.html for more information on insured status requirements. Note: QCs also affect eligibility for Disability Insurance Benefits.
• The amount that Social Security considers to be “Substantial Gainful Activity” (SGA), which roughly means working, will increase from $1,550 per month to $1,620 per month (or $2,700 per month if you are blind). The threshold amount for a Trial Work Period (TWP) will also increase from $1,110 per month to $1,160 per month
• The SSI Federal Payment Standard will increase from $943 to $967 per month for individuals and from $1,415 to $1,450 per month for couples.

When Do These Changes Take Effect?

Americans receiving Social Security benefits will see this increase in their monthly payments beginning January 2025. Those receiving SSI benefits will see the change at the end December 2025.

It’s also important to note that the rate for Medicare Medicare Part B premiums for 2025 will increase $10.30 from $174.70 to $185.00 per month.  This will change individuals’ monthly benefit amounts, as payments toward those premiums are often deducted directly from Social Security checks.

At The Feingold Law Office, we help individuals in Social Security Disability claims and in personal injury matters. For specific questions or concerns regarding filing for Social Security benefits or appealing a denial,  please reach out today for more information. We are here to help!

Author:

Richard I. Feingold
Richard I. Feingold & Associates, P.C.
Personal Injury & Social Security Disability