An estimated 96.7% of adults aged 60 to 89 receive Social Security. Although the average monthly benefit amount for retired workers was just $1,920 in August 2024, Social Security constitutes a large portion of many people’s income.
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In fact, 50% of people ages 65 and up receive half of their total income from the program. Roughly 25% of these individuals get 90% or more of their income from Social Security.
Given Social Security’s importance, it might come as a relief that the Social Security Administration has finally announced its COLA — cost-of-living adjustment — increase for next year. While it is indeed higher, it might not be quite as high as benefit recipients might have hoped.
Here’s what retirees should know about changes to Social Security benefits heading into 2025.
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Next year, Social Security benefits and Supplemental Security Income (SSI) payments will increase by 2.5% for nearly 73 million Americans. When you break it down, this is roughly $50 more each month.
If your current Social Security check is $1,920 each month, you’ll get around $1,968 — 2.5% of $1,920 — starting in January. If you receive SSI, those payments will increase on Dec. 31, 2024.
For context, the COLA increase in 2024 was 3.2%. It’s averaged out at about 2.6% over the past decade.
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While 2.5% might not seem like much, the idea is to keep up with inflation. For the 12 months ending in September 2024, the average inflation rate has been 2.4%. This is 0.1% lower than it was last year.
Ideally, the 2.5% increase will match inflation going into 2025. This means the benefit amount will make up for any increased everyday costs.
Starting in January, there will be a few other adjustments to Social Security. Specifically, the maximum taxable earnings will increase from $168,600 to $176,100. This won’t be as relevant to current retirees, but those who are nearing retirement age should be aware of this change.
Right now, the Social Security tax rate is 12.4% — 6.2% for the employee, 6.2% for the employer. With this change, employees will pay up to $10,918.20 in 2025, compared to $10,453.20 currently. The employer will pay the other $10,918.20.
