Current:Home > reviewsWhat to know about this year’s Social Security cost-of-living adjustment -MoneyBase
What to know about this year’s Social Security cost-of-living adjustment
View
Date:2025-04-12 18:19:36
NEW YORK (AP) — Tens of millions of older Americans will see an increase in benefits this January when a new cost-of-living adjustment is added to Social Security payments.
The 2.5% raise is intended to help meet higher prices for food, fuel, and other goods and services. The average recipient will see an increase of about $50 per month, according to agency officials. Social Security recipients received a 3.2% increase in their benefits in 2024, and some retirees are concerned that this year’s increase is not big enough to meet their needs.
The Social Security Administration will begin notifying recipients about their new benefit amount by mail starting in early December. Adjusted payments to nearly 7.5 million people receiving Supplemental Security Income will begin on December 31. Supplemental Security Income provides monthly payments to adults and children who have income below specific financial limits and qualify to receive Social Security benefits.
Here’s what to keep in mind:
How does Social Security work?
About 72.5 million people, including retirees, disabled people and children, get Social Security benefits.
The program is funded by taxes on income subject to Social Security payroll taxes. The government uses taxes from working people to pay benefits to people who have already retired, people who are disabled, the survivors of workers who have died, and dependents of beneficiaries. In 2025, the Social Security payroll tax will be assessed on the first $176,100 of income, up from $168,600 this year
While the money is used to pay people currently receiving benefits, any unused money goes to the Social Security trust fund. Some of the money in the trust, together with the Social Security contributions of people in the workforce, pays for future benefits.
To determine what amount of Social Security you’ll receive, the government calculates a percentage of your highest wages from your top 35 years of earning, factoring in when you choose to start receiving benefits.
How is the cost of living adjustment calculated?
The COLA is calculated according to the Bureau of Labor Statistics’ Consumer Price Index, but there are calls to use a different index — one that measures price changes based on the spending patterns of the elderly — like healthcare, food and medicine costs.
The smaller increase for 2025 is because inflation is slowing. That means prices aren’t increasing as fast as they were at the height of the COVID pandemic. Recipients got a historically large 8.7% benefit increase in 2023 because of record high inflation.
Is the trust running out of money?
Future problems with the fund have long been predicted, largely because of demographic shifts. As birthrates decline, fewer people become workers, which results in fewer payments of payroll taxes. Meanwhile, more Baby Boomers are retiring and collecting Social Security.
The annual Social Security and Medicare trustees report released in May said the program’s trust fund will be unable to pay full benefits beginning in 2035. If the trust fund is depleted, the government will be able to pay only 83% of scheduled benefits, the report said.
___
The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.
veryGood! (8)
Related
- 'Squid Game' without subtitles? Duolingo, Netflix encourage fans to learn Korean
- 7 people killed in a fiery crash in southeastern North Carolina
- Brett Favre Parkinson's diagnosis potentially due to head trauma, concussions
- Army vs. Temple live updates: Black Knights-Owls score, highlights, analysis and more
- Meet the volunteers risking their lives to deliver Christmas gifts to children in Haiti
- Funniest wildlife photos of the year showcased in global competition: See the finalists
- Cardi B Unveils One of Her Edgiest Looks Yet Amid Drama With Estranged Husband Offset
- You Might’ve Missed Machine Gun Kelly’s Head-Turning Hair Transformation at the 2024 PCCAs
- Woman dies after Singapore family of 3 gets into accident in Taiwan
- Glock pistols are popular among criminals because they’re easily modified, report says
Ranking
- Justice Department, Louisville reach deal after probe prompted by Breonna Taylor killing
- Lawyers in NCAA athlete-compensation antitrust cases adjust settlement proposal with judge
- Ulta Fall Haul Sale: 46 Celebrity Beauty Favorites from Kyle Richards & More—Starting at $3
- Titan implosion hearing paints a picture of reckless greed and explorer passion
- Romantasy reigns on spicy BookTok: Recommendations from the internet’s favorite genre
- At the New York Film Festival, an art form at play
- What to know about Hurricane Helene and widespread flooding the storm left across the Southeast US
- Miranda Lambert and Brendan McLoughlin’s Romance Burns Like Kerosene at People’s Choice Country Awards
Recommendation
At site of suspected mass killings, Syrians recall horrors, hope for answers
Tennessee judge denies attempt for a new trial in Holly Bobo killing
North Carolina lieutenant governor names new chief aide as staff departures grow
Carly Pearce Weighs In on Beyoncé’s Country Music Association Awards Snub
See you latte: Starbucks plans to cut 30% of its menu
Stevie Nicks releases rousing feminist anthem: 'May be the most important thing I ever do'
Voting technology firm, conservative outlet reach settlement in 2020 election defamation case
Texas official indicted, accused of making fake social media posts during election