The Social Security cost of living adjustment (COLA) for 2025 is about to go into effect, which has made people who get Social Security benefits curious about how this change will affect their finances.
The Social Security Administration (SSA) said that the COLA for this time will be 2.5%. This is a small increase, but it means that millions of Americans will get more money each month. These increases impact benefits for retirees, workers, disabled workers, and people who have lost a loved one, ranging from retirement to SSDI (disability) to SSI.
What You Need to Know About January 2025: Your Social Security benefits will go up
Starting in January 2025, this change will have an effect on about 72.5 million recipients. People who get Social Security Disability Insurance, retirement payments, or Supplemental Security Income (SSI) are all in this group.
The COLA is meant to make sure that people who get benefits keep their buying power in the face of inflation by changing their benefits to match the rise in the cost of living. Even though the 2.5% increase is less than the 3.2% change that happened in 2024 and the big 8.7% change that happened in 2023, it still shows that the inflation rate is slowing down compared to past years.
It’s possible that this drop means the economy is becoming more stable, which is good for customers in general. In December, people who get Social Security payments will get a notice explaining how their benefits have been changed to reflect the rising cost of living.
People who use the online site “My Social Security” will be able to find this information in the “Message Center” after logging in. The Social Security Administration is taking this proactive step to keep people informed about changes to their benefits so that they can make the right financial plans for when the changes happen.
Retirement, Survivors, and Disability Insurance (RSDI) and Supplemental Security Income (SSI) are two programs that the Social Security Administration (SSA) runs that give people payments. These programs are meant to help millions of Americans get by each month by giving them money. This will give them a steady source of income and improve their health.
There are five rounds of payments each month, which happen on the first and third of each month. SSI recipients, people getting early retirement, survivors, or disability payouts, as well as retirees living abroad, are the only ones who can use these dates.
Second, third, and fourth Wednesdays: This is when payments are made based on the beneficiary’s birthday, putting them into groups that get money on one of these Wednesdays.
Don’t forget that the SSA says you should wait up to three business days in case your payments didn’t come on time. After that, you can call the SSA at 1-800-772-1213 or go to your local office. The people there will be happy to help you figure out what’s wrong.
How does the COLA change the way Social Security recipients plan their general finances?
In several ways, the Cost-of-Living Adjustment (COLA) has a big impact on how Social Security recipients plan their finances:
Rising prices and inflation are what COLA is all about. Its main goal is to keep Social Security payments level. By raising benefits to counteract the effects of inflation, helps recipients keep up their standard of living in retirement.
From age 62 on, COLAs are added every year, even if benefits aren’t claimed until later. This means that the changes add up over time, giving people who wait longer to claim Social Security a higher payout amount. For instance, if you wait until age 70 to claim, you might get a much higher COLA-adjusted income than if you claim at age 62.
To plan for retirement, it’s important to know how COLA changes benefits at different ages. Beneficiaries have to decide if they want to claim early and get a smaller amount or wait and get a higher base benefit with compounded COLA rises.
Relying on Social Security income: For many seniors, Social Security is a big part of their income in retirement. The average payout is only about $22,600 a year, but most people need over $75,000 a year to live comfortably in retirement. Some of this gap is closed by COLAs, but most people still need to save more for retirement.
When beneficiaries plan their Social Security income and total budget for retirement, they should take into account the annual COLA increases. The changes help keep spending power, but they aren’t very big (2.5% for 2025). People who are retired still need to think about how inflation will affect their spending over a long retirement.
