In 2025, people receiving Social Security retirement and disability benefits in the United States will see an increase in their monthly income, thanks to the Cost-of-Living Adjustment (COLA). This adjustment, confirmed by the Social Security Administration (SSA) in October, will be 2.5%. While COLA provides a boost to all benefit recipients, not everyone will see the same increase.
The change depends on the type of benefit received and the amount each person already collects. Let’s explore how COLA will impact Social Security benefits in 2025 and who stands to gain the most.
The COLA adjustment and its impact on retirement and disability benefits
The Cost-of-Living Adjustment is designed to help Social Security benefits keep pace with inflation. Each year, the SSA reviews this adjustment, using the consumer price index (CPI) as a guide to determine how much benefits should increase. For 2025, the adjustment rate is set at 2.5%, meaning everyone receiving Social Security benefits will see a rise in their monthly income. However, the exact amount of the increase will vary across individuals.
The SSA administers three main types of benefits: retirement, Social Security Disability Insurance (SSDI), and Supplemental Security Income (SSI). Each of these programs serves a different group of people with varying needs and income levels, which means that the increase they receive will differ based on the type of benefit and the amount already received.
Supplemental Security Income (SSI): the lowest benefit level
SSI provides the lowest maximum benefit amount, aimed specifically at individuals with disabilities, blindness, or those over 65 with limited financial resources. For a single individual, the maximum benefit amount is $943 per month, while a couple eligible for SSI can receive up to $1,415 per month. Additionally, a $472 amount is available for those designated as “essential persons,” or individuals who provide necessary support within the household.
With the 2.5% COLA in 2025, these SSI benefits will see a modest increase. For SSI beneficiaries, this translates to:
- Single individuals: The maximum will rise from $943 to $967 per month.
- Couples: The maximum will increase from $1,415 to $1,450 per month.
- Essential persons: The benefit amount will go up to $484 per month, up from $472.
These incremental increases, while modest, will help ease the impact of inflation on the most vulnerable households. However, due to the SSI benefit caps, the total dollar increase for SSI recipients is lower than for other benefit programs.
Retirement: greater increase for middle and higher incomes
For those receiving retirement benefits, the 2.5% COLA will mean an average increase of about $50 per month. The average retirement benefit, which in December 2024 is approximately $1,927, will increase to around $1,976 in January 2025.
In this category, the COLA’s impact will be more noticeable for those with higher monthly retirement benefits. The greater the current benefit, the more significant the dollar increase after the adjustment. For instance, a person with a retirement benefit of $2,500 might see an increase of about $62, while someone with a smaller benefit amount will see a smaller increase. This system is designed to help maintain purchasing power, but it tends to benefit higher-income recipients proportionally more.
SSDI: disability support also benefits from the increase
People receiving Social Security Disability Insurance (SSDI) will also see an increase thanks to the 2.5% COLA. On average, SSDI beneficiaries currently receive about $1,539 per month, though some individuals may qualify for up to $3,822, depending on their earnings history and level of disability.
With the 2.5% adjustment for 2025, SSDI beneficiaries will see an average monthly increase of around $39. For those receiving the maximum SSDI benefit of $3,822, the increase could be approximately $95—a helpful amount to offset the rising cost of living, especially given the specific needs that SSDI recipients often have.
Why COLA affects different benefits in distinct ways
The varied impact of COLA largely stems from the structure of each program and the maximum amounts each one provides. While retirement and SSDI benefits allow for higher payments, SSI is designed to offer more basic support, particularly for individuals without other income sources. Consequently, the SSI increases are more limited.
Additionally, COLA adjustments are not unique to Social Security programs; many other federal and state assistance programs also use the consumer price index to adjust their benefits, though the specific increase can vary. This approach aims to help beneficiaries maintain their purchasing power as prices rise, which is particularly important given the current inflationary environment.