The Social Security Administration announced it would be increasing benefits by 2.5% to account for cost-of-living adjustments in January 2025.
On average, this means that beneficiaries will see an extra $50 in their monthly benefits allotment.
The new COLA increase will affect nearly 68 million Social Security beneficiaries and 7.5 million people collecting Supplemental Security Income.
“Social Security benefits and SSI payments will increase in 2025, helping tens of millions of people keep up with expenses even as inflation has started to cool,” Social Security Commissioner Martin O’Malley said in a statement.
Here is everything you need to know about the COLA increase.
What is the COLA?
The cost-of-living adjustment is an increase to beneficiaries’ payments that ensures their monthly checks provide enough income to help them keep up with inflation.
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How is the COLA calculated?
The COLA is determined by taking the percentage increase in the consumer price index for urban wage earners and clerical workers from the third quarter of the last year the COLA was determined and comparing it in the third quarter of the current fiscal year. The Bureau of Labor Statistics calculates the COLA.
Congress included the COLA in the 1972 Social Security Amendments, and it became automatic beginning in 1975.
How does this year’s COLA compare to previous years?
Over the past 10 years, the COLA has increased by an average of 2.6%. Last year’s COLA was calculated to be 3.4%.
When can people see the changes to their benefits?
The SSA will make its notices available online by December. However, people will need to set up their My Social Security accounts by Nov. 20 to see their COLA notices online. If not, beneficiaries will receive their notices in the mail.
How is the COLA notice different this year?
This year’s COLA notice is only one page long and written in plain English. It will also provide exact dates and dollar amounts of a person’s new benefit amount.
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What other changes can we expect to see?
Several changes have taken effect this year that stand to affect Social Security benefits.
Beginning in January, the maximum amount of earnings subject to the Social Security tax will increase to $176,100 from $168,600.