Social Security Benefits Will Increase 2.5% In 2025

Social Security benefits and Supplemental Security Income (SSI) benefits will increase by 2.5% in 2025 for more than 72.5 million Americans. On average, Social Security retirement benefits will increase by about $50 per month starting in January.

Nearly 68 million Social Security beneficiaries will see a 2.5% cost-of-living adjustment (COLA) beginning in January 2025. Increased payments to almost 7.5 million SSI recipients will begin on December 31, 2024. (If that math doesn’t appear to be mathing, it’s because some people receive Social Security benefits and SSI benefits.)

"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," said Martin O'Malley, Commissioner of Social Security.

While the average benefit for all retired workers is $1,976 per month, benefits can reach as high as $4,018 per month—that’s the maximum Social Security benefit for a worker retiring at full retirement age. It was $3,822 in 2024.

And, as a rule of thumb, Social Security retirement benefits are increased by a certain percentage for each month you delay starting your benefits beyond full retirement age. For those born in 1943 or later, the increase is 2/3 of 1%, giving many workers an incentive to wait until age 70 to collect. However, there’s no benefit to waiting beyond that age—the increase stops when you reach age 70.

Social Security Earnings

Social Security benefits are based on Social Security taxes collected. During your working life, wages and self-employment income are subject to Social Security and Medicare taxes. For wage earners, Social Security and Medicare taxes are called FICA (Federal Insurance Contributions Act) taxes and are taken out of your paycheck. Taxes on self-employment income are sometimes called SECA (Self-Employment Contributions Act) taxes since self-employed persons pay both the employee and employer contributions.

If you're employed, you pay Social Security tax at a rate of 6.2% as the employee, and your employer pays the same tax rate on your behalf. If you're self-employed, you are responsible for both parts.

Social Security taxes are subject to a wage cap. That means you pay Social Security taxes on your earnings until you hit the magic number. After that, your wages are no longer subject to Social Security taxes. For 2025, that magic number is $176,100 (commonly called the taxable maximum). That means that whether you make $1,000 or $100,000, you will pay Social Security taxes on your income. But if you earn $176,101? You'll pay Social Security taxes on the first $176,100 but not on the extra dollar. And if you earn $1,176,100? Same result: you'll pay Social Security taxes on $176,100, but not on the extra million.

If those increases seem disproportionate, it’s because the Social Security taxable minimum is based on changes in the national average wage index, while the increase in benefits is based on a different index—more on that in a bit.

If you're a wage earner, your employer collects your Social Security and Medicare payments and remits both their portion and your share to the government. Self-employed persons pay the IRS directly. No matter who pays, these taxes are credited toward your retirement benefits.

Earnings History

You need to demonstrate an earnings history to qualify for Social Security retirement benefits. Most workers—including those who don't need to file a tax return because they don't make enough to pay taxes—pay into the Social Security system. The IRS received nearly 162 million tax returns in 2023, but the SSA reported that about 180 million peopleworked and paid Social Security taxes in 2023.

Social Security pays many kinds of benefits, but the most common are retirement benefits—those are intended to replace a percentage of your pre-retirement income based on your lifetime earnings. The amount varies depending on how much you earn during your lifetime and when you first receive your benefits. Typically, the earlier you collect benefits, the lower the amount that you'll receive.

To qualify for benefits, most people need 40 credits, which is about ten years of work. You earn credits as you go. In 2024, you earn one credit for each $1,730 in earnings, up to a maximum of four credits per year. The amount needed to earn one credit usually increases each year—it will go up to $1,810 in 2025.

Social Security will determine the amount of your benefits based on how much you earned during your lifetime. The more you make, the higher the benefit (subject to limitations). If there were some years when you didn't work or reported low earnings, your benefits may be lower. And if you worked but have no record of your compensation, your benefits may also be lower.

Earnings Limits

The earnings limit for workers younger than the "full" retirement age—67 for those born after 1960 (you can check prior years using the Full Retirement Age Chart)—will increase to $23,400 annually or $1,950 per month.

Practically speaking, this means that in 2025, most people receiving Social Security early will lose $1 in benefits for every $2 in earnings above $23,400. Those who reach their full retirement age in 2025 have a more generous earnings limit—$62,160 annually or $5,180 per month—before they reach full retirement age and will only lose $1 in benefits for each $3 earned above the limit.

(Note that the work penalty is not as bad as it sounds since Social Security recalculates your benefits when you reach full retirement age to account for any amounts you lost before that date because you claimed early but still worked. After full retirement age, a Social Security recipient can earn an unlimited amount without their benefits check being docked.)

There is no limit on earnings for workers who are "full" retirement age or older for the entire year.

Checking Your Earnings

Current beneficiaries should receive notices in the mail in early December with their new individual 2025 benefits amounts. You must have a personal Social Security account by November 20, 2024, to see your COLA notice online.

To get started, visit www.ssa.gov/myaccount. You'll need to sign in. If this is your first time clicking through, you'll also need to register. As with the IRS, SSA now uses ID.me to verify your identity. Once you've created an account, you can review your earnings record and estimate your benefits.

SSA encourages taxpayers to review earnings records every year. If something is missing, you won't be appropriately credited, which impacts your future benefits. And you'll want to check regularly—if too much time passes, it could be hard to get older tax documents (online wage and payroll records are only available through IRS.gov for the past three years). Additionally, years after the fact, some employers may be out of business or unable to provide older payroll information.

SSI Benefits

SSI stands for Supplemental Security Income. It provides monthly cash assistance to people with limited income and resources who are 65 or older, blind, or disabled. Children with disabilities can also get SSI.

To qualify, you must meet the income and resources tests:

• Your countable income must not exceed the federal benefit rate (FBR). The FBR for 2024 is $943 per month for individuals and $1,415 for couples. If you make more, you may be eligible for a decreased benefit. Generally, the more countable income you have, the less your SSI benefit will be.
• Your resources (like real estate, bank accounts, cash, stocks, and bonds) must be $2,000 or less ($3,000 for a couple). Your resources do not usually include the home and land where you live; life insurance policies with a face value of $1,500 or less; your car; burial plots for you and members of your immediate family; and up to $1,500 in burial funds for you and up to $1,500 in burial funds for your spouse.

Some states add a supplement, making payments and allowable income levels higher. States that do not have a supplement include Arizona, Arkansas, Mississippi, North Dakota, Tennessee, and West Virginia.

If you get SSI, you may also be able to get help from your state or county, including Medicaid, food, or other social services (call your local social services department or public welfare office for information). Additionally, if you get SSI, you may qualify for help buying food through the Supplemental Nutrition Assistance Program (SNAP). If everyone in your home is applying for or getting SSI, you can apply for SNAP through your Social Security office.

For federal purposes, SSI benefits are not taxable.

Historical Increases

How does Social Security determine how much payments will go up? The Social Security Act ties the annual COLA to the increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) as determined by the Department of Labor's Bureau of Labor Statistics—that's been the case since 1975. (BLS statistics are also used to determine IRS adjustments.)

Over the last decade, the COLA increase has averaged about 2.6%. The COLA was 3.2% in 2024.

Medicare

Information about Medicare changes for 2025 will be available at www.medicare.gov. If you have an online my Social Security account, you’ll receive a notice in your inbox detailing those new rates beginning in late November. If you don’t have an online account, you’ll receive your COLA notice by mail in December.