On October 10, 2024, the Social Security Administration (SSA) declared a 2.5 percent increase in the monthly Social Security benefits. This Cost of Living Adjustment (COLA) is aimed at preserving the purchasing power of Social Security and Supplemental Security Income benefits against inflation. The increase is determined by the percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the previous year to the third quarter of the current year. If there is no increase, or if there is a decrease in the index, there will be no COLA.
The CPI-W is calculated by the Bureau of Labor Statistics in the Department of Labor and is the official measure used by the Social Security Administration to compute COLAs by law. The COLA provision was introduced by Congress as part of the 1972 Social Security Amendments, and automatic annual COLAs commenced in 1975. Prior to that, benefits were increased only through special legislation enacted by Congress.
Starting in 1975, Social Security implemented automatic annual cost-of-living adjustments, linking COLAs to the yearly rise in the Consumer Price Index, according to the SSA.
Noteworthy changes for 2025 include:
- The maximum taxable earnings amount, subject to the Social Security tax will rise to $176,100.
- The earnings test thresholds for 2025 will increase from $22,320 to $23,400 for all years before a beneficiary's full retirement year. In the year a worker reaches full retirement age, the earnings threshold will increase from $59,520 to $62,160, affecting all months before the beneficiary's date of birth.
For a list of the updates, print or download a copy of the 2025 Social Security Fact Sheet and keep it accessible for your clients' inquiries. Understanding these updates and changes is crucial for anyone planning for, or relying on Social Security benefits.