The Social Security annual cost-of-living adjustment (COLA) for 2025 is 2.5%, the Social Security Administration (SSA) announced Thursday. This is the smallest increase since 2020, as expected, and follows an increase of 8.7% in 2024. According to the SSA, the 2.5% increase will translate to an additional $49 for the average retiree, increasing the average monthly check from $1,927 to $1,976. Married couples will see an average increase of $75, raising their monthly benefit to $3,089 up from $3,014.
The 2025 COLA in context
Although the 2.5% COLA is lower than the 3.2% in 2024, it isn't far from the historical average. The COLA has averaged about 2.6% over the past 20 years. It went as low as 0.0% in 2010 and 2011 after the housing crisis and as high as 8.7% in 2023 when inflation spiked after COVID disruptions.
How you can increase your monthly Social Security benefits
One way to ensure a larger monthly Social Security benefit is to delay claiming your benefits until 70. You receive an extra 2/3 of 1% for each month you delay after your birthday month and you can further increase your benefit up to 8% for each full year you wait until age 70. If you wait until 70, your monthly benefit is 28% higher than if you started to collect benefits at your full retirement age (FRA.)
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Collecting benefits prior to your FRA can lead to a permanent decrease in your benefits. If you were born in 1960 or later, taking benefits at 62 would reduce your check by 30% and spousal benefits would be reduced by 35%. The maximum benefit for a spouse is only 50% of the benefit the worker would receive at FRA. The percentage reduction for the spouse would be applied after the automatic 50% reduction.
You can use your retirement savings to postpone receiving Social Security and create a 'Social Security bridge' to help reduce early-claiming penalties and collect a higher monthly income. Whether you have an IRA or 401(k), both offer strategies to help you delay claiming your benefits until your FRA if not later.
How is the COLA calculated?
The Consumer Price Index (CPI-W) for Urban Wage Earners and Clerical Workers is the benchmark the SSA uses to determine the COLA, but that wasn’t always the case. How the COLA is calculated has changed over the years. Initially, a new act of Congress was required each time benefits were increased. However, soaring inflation in the 1970s was rapidly eroding the purchasing power of fixed pensions and SS benefits. Congress enacted the COLA provision as part of the 1972 Social Security Amendments, and automatic annual COLAs began in 1975.
The COLA is now determined by the inflation observed in July, August, and September in the CPI-W. The SSA calculates the percentage change between average prices in the third quarter of the current year and the third quarter of the previous year.
Proposals that call for the COLA to be based on the Consumer Price Index for Americans aged 62 or older (CPI-E) have so far failed. Proponents of this price index say it reflects the costs incurred by older adults more accurately. Medical expenses, an increasing burden on older adults, are weighted more heavily in the CPI-E than in the CPI-W.
| Year | COLA | Average monthly benefit |
|---|---|---|
| 2015 | 1.7% | $1,341.77 |
| 2016 | 0.0% | $1,360.13 |
| 2017 | 0.3% | $1,404.15 |
| 2018 | 2.0% | $1,461.31 |
| 2019 | 2.8% | $1,502.85 |
| 2020 | 1.6% | $1,544.15 |
| 2021 | 1.3% | $1,658.03 |
| 2022 | 5.9% | $1,825.14 |
| 2023 | 8.7% | $1,927 (latest estimate) |
| 2024 | 3.2% | $1,976 (latest estimate) |
Earnings test when you receive benefits while working
Earned income can cost you if you continue to work after claiming Social Security benefits early. The Social Security earnings test for annual income is applied and reduces your monthly benefit. The SSA temporarily withholds $1 of your benefits for every $2 earned over $23,400 or $1,950 per month for 2025. In a year the worker hits full retirement age, the test is more generous — the worker forfeits $1 in benefits for every $3 in 2025 earnings above $62,160 or $5,180 per month.
Social Security tax wage cap for 2025
Social Security caps the amount of income you pay taxes on and get credit for when benefits are calculated. The Social Security tax limit is $176,100 in 2025 and is indexed to inflation, so you can anticipate it will go up in 2026.
In 2024, the tax limit was $168,600, and it rose by $8,400 from $160,200 in 2023.
How much you need to earn to qualify for Social Security credits in 2025
You must earn a minimum of 40 Social Security credits to qualify for retirement benefits, and you are allowed to earn up to four credits per year. The SSA cannot pay you benefits if you don’t have enough credits.
The SSA also uses the number of credits you’ve earned to determine your eligibility for retirement or disability benefits, Medicare, and your family’s eligibility for survivor benefits.
To earn one credit in 2025, you must have wages and/or self-employment income of $1,810, and you must earn $7,240 to get four full credits. In 2024, you only needed to earn $1,730 to earn a credit, $80 less than what you need to earn in 2025. This amount increases annually, so it will rise in 2026.
Disclaimer
Data for the average retiree check by year comes from Annual Statistical Supplement to the Social Security Bulletin, 2023. You can view the information by viewing Table 3.C4 Average monthly amount of Social Security (OASDI) benefits and Supplemental Security Income (SSI) payments, December 1950–2022.
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- Social Security Earnings Tests: Five Things You Must Know
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