Every year, Social Security recipients receive a Social Security raise from the cost of living adjustment (COLA), but there are additional increases that many retired workers may be unaware of. This increased boost will benefit more than 64 million retirees who rely on Social Security to meet their monthly living expenses.
If you qualify for retirement benefits or plan to apply soon, learn about the Social Security Administration’s new adjustments that will increase payouts for beneficiaries next year.
The Three Significant Increases That Will Affect Retirees’ Social Security Payments in 2025
Retirees Will Benefit From the Cost of Living Adjustment (Cola)
Every year, Social Security claimants, particularly retirees, eagerly await the cost-of-living adjustment (COLA). This statistic is valid until October 2024 and takes effect January 1, 2025. The COLA is a calculation performed by the Social Security Administration to modify the benefits it distributes based on inflation, which frequently boosts monthly payouts.
Even though the COLA for 2025 has not been formally declared, the Senior Citizens League’s most recent forecasts suggest that the cost of living adjustment will be between 2.5% and 3%, with a higher likelihood of 2.5%. If this % were to take effect, retirees would get the following payout amounts as of January 2025:
| Retirement Age | Social Security Checks | 2.5% COLA Increase | Extra Income |
| On Average | $1,900 | $1,948 | $48 |
| Age 62 | $2,710 | $2,778 | $68 |
| Age 67 | $3,822 | $3,918 | $96 |
| Age 70 | $4,873 | $4,995 | $122 |
Increase the Full Retirement Age for Upcoming Retirees
The Social Security Administration utilizes the Full Retirement Age (FRA) as a standard criterion to determine when you will be eligible for full benefits. Depending on your birth year, this age ranges from 66 to 67. Beginning in 2025, the FRA will be 66 years and ten months. The FRA under the age of 67 will not return this year. Individuals turning 66 in 2024 will have the same FRA as those born in 1958, which is 66 and 8 months by lagradaonline.
Additionally, people born in 1959 who turn 66 next year will have to wait until they are 66 and 10 months old to receive their full benefits. Anyone born after 1960 will have a FRA of 67 in 2026; they will not be younger. This means you will receive all of the Social Security payments you are eligible for up to that date. You will receive less money at age 62, though you can apply earlier; nevertheless, if you wait until age 70, your monthly benefit will grow by 8%.
Some Retirees Will Face a Social Security Tax Rise
The federal government limits the amount of earnings that are subject to Social Security taxes. This impacts the amount of retirement benefits you will eventually receive. Your retirement income will increase proportionally to your taxable income. Currently, the maximum taxable income is $168,600.
This figure rises almost every year. For example, in 2023, workers will only pay Social Security taxes on wages of up to $160,200 per year.
According to the Social Security Trustees’ intermediate predictions, the amount you pay in Social Security taxes will increase to $174,900 by 2025. Some employees who currently make more than $168,600 may be required to pay taxes on an additional $6,300.
If Nothing Changes, Pensioners May Face a Reduction to Their Monthly Pensions
The Committee for a Responsible Federal Budget’s analysis found a serious funding concern for Social Security as retirement ages rise and the United States’ top-heavy population grows.
As a result, the Social Security program’s reserves for paying remaining payments are depleting as payroll taxes and other income are paid out faster than benefits are paid in. Furthermore, according to the CRFB estimate, today’s youngest pensioners will be 71 years old, while today’s 58-year-olds will reach the average retirement age.
However, the authors warned that if reserves are depleted, the law restricts disbursements to incoming funds, resulting in a 21% fall in benefits for the program’s 70 million members.
If the benefit cutbacks are implemented, millions of beneficiaries will need to learn the precise extent of the benefit cuts to plan and balance their financial budgets, as benefit reductions will vary depending on retirees’ age, work histories, and lifetime earnings.