Social Security beneficiaries are set to receive their first payments for 2025, and those recipients can look forward to a 2.5% cost-of-living adjustment over last year's checks.
The benefit boost will be a welcomed development for many, according to analysis shared with ThinkAdvisor by the Colcom Group, a consulting firm. But the cost-of-living adjustment could also result in some beneficiaries needing to adjust to higher taxes.
“[The COLA] is designed to help retirees maintain their purchasing power in the face of inflation,” the analysis states. “The average retiree can expect about $50 more per month in benefits, starting with payments in January 2025. While this 2.5% increase is slightly lower than the 10-year average COLA of 2.6%, it still offers some relief for many on fixed incomes.”
As ThinkAdvisor has reported, the Social Security Administration adjusts benefits based on the Consumer Price Index to help ensure that inflation doesn’t erode retirees’ buying power.
“For some, [the 2025 COLA] could mean a welcomed boost to monthly benefits,” the analysis continues. “For others, it might mean adjusting to higher taxes. Whether you’re planning for retirement or managing a growing business, these changes can potentially affect your financial outlook, making it crucial that you plan ahead.”
For those still in the workforce — especially higher earners — it's important to note that the SSA is also increasing the maximum amount of income subject to Social Security taxes. In 2024, the taxable maximum was $168,600; in 2025, this cap will rise to $176,100.
