U.S. Social Security Increase for 2025

(Reuters) – U.S. retirees will receive a 2.5% increase in their Social Security checks in 2025, as announced by the Social Security Administration on Thursday. This translates into an average of roughly $50 more per month starting in January.

The cost-of-living adjustment (COLA) correlates with inflation changes. For 2024, the increase was 3.2%, reflecting higher inflation at that time. The adjustment is determined by averaging third-quarter inflation measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

This increase is the smallest annual raise since 2020, when retirees received a 1.3% bump. Following that, the rate surged due to soaring inflation during the COVID-19 pandemic, before stabilizing at more normalized, though still elevated, levels. The Federal Reserve aims for a 2% inflation rate.

The same 2.5% increase will also apply to individuals receiving Supplemental Security Income benefits, aimed at assisting the elderly and individuals with disabilities.

Overall, more than 72.5 million people will benefit from this increase, according to a statement from the Social Security Administration.

Additionally, starting in January, the maximum earnings subject to the Social Security tax will rise to $176,100, up from $168,600 as reported by the agency.