Social Security Raises Benefit by 2.5% for 2025

The Social Security Administration announced a 2.5% increase of Social Security and Supplemental Security Income payments for 2025, even as inflation numbers came in a bit higher than expected.

The increase will provide an average increase of roughly $50 per month, according to its annual cost-of-living adjustment announcement Thursday.

That boost is slightly below the average annual cost-of-living adjustment of 2.6%, the administration noted in its announcement. The most recent adjustment was 3.2% for 2024, when inflation was still at a higher level and hitting many retirees’ pocketbooks.

“Some other adjustments that take effect in January of each year are based on the increase in average wages,” the administration wrote in its announcement. “Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) is slated to increase to $176,100 from $168,600.” 

The Social Security increase was in line with a September forecast by the Senior Citizens League, a nonprofit that tracks the benefits. It estimated the increase would boost the average Social Security payment by $48 to $1,968.

On Thursday, the Consumer Price Index, a key measure of inflation, was revealed to be up 2.4% from one year earlier, according to the Bureau of Labor Statistics. That was slightly larger than many analyst estimates, signaling that inflation may be cooling at a slightly slower pace than markets anticipated.

According to John Choong, head of equities and markets at Investors Edge, the results may contribute to an argument that the Federal Reserve should hold back on further interest rate cuts; September’s rate reduction was its first since 2020.

“While headline inflation continued to cool in September, we think the downward trend has hit a bottom for the time being,” Choong says via email. “With both core and supercore inflation remaining sticky, any further cooling in overall inflation will be heavily reliant on energy and food costs, which seems unlikely given the recent spike in oil prices. Thus, the Fed’s stance on future cuts may need to be reassessed in light of these developments.”

Choong also pointed to the Federal Open Market Committee meeting minutes released Wednesday, which indicated that “more members than previously thought” were split between whether to make the first rate cut 50 basis points or 25 basis points.

“This, coupled with a surprisingly resilient labor market and higher wage growth since their September meeting, suggests the Fed may need to revert back to a more hawkish stance until they see further progress on inflation and/or a weaker labor market,” Choong says. “In our opinion, we don’t think a November rate cut is on the cards, and we now only expect one more 25bps cut in December, totaling to 50bps for 2024.”

The Social Security administration will begin notifying people about the benefit increase via mail starting in early December. It also noted that, for the first time, beneficiaries will “receive a newly designed and improved COLA notice that makes it easier for customers to find the information they need most.”