The Social Security Administration (SSA) has announced the 2025 Cost of Living Adjustment (COLA), which will affect monthly benefits for retirees starting in the new year.
What is COLA?
Since 1975, Social Security recipients have received annual Cost-of-Living Adjustments (COLA) to ensure their benefits keep pace with inflation. This adjustment helps maintain the purchasing power of Social Security and Supplemental Security Income (SSI) benefits.
The COLA increase for 2025 is set at 2.5%, reflecting slowing inflation over the past year. While this is slightly lower than the 3.2% increase from 2024 and just below the 10-year average of 2.6%, it still represents a positive adjustment.
Starting in December, you will receive a notification by mail, and you can also view your updated benefits online through your Social Security account at SSA.gov.
Annual Tax Cap Increase
In addition to the COLA increase, there is also a yearly cap on income subject to Social Security taxes, known as maximum taxable earnings. For 2025, this cap has increased to $176,100, up from $168,600 in 2024.
This significant rise reflects the ongoing effort to boost funding for the Social Security program. It’s expected that this cap will continue to increase in the future, as it remains a key method for supporting the program’s financial stability.
Earnings Limit for Social Security Beneficiaries
If you are collecting Social Security benefits while still working and haven’t reached full retirement age, your benefits may be impacted by the annual earnings limit.
- If you won’t reach full retirement age in 2025, the annual earnings limit is $23,400. For every $2 you earn over that limit, $1 will be deducted from your Social Security benefits.
- If you reach full retirement age during 2025, the limit increases to $62,160, with $1 deducted from your benefits for every $3 earned above this threshold.
- Once you reach full retirement age, there is no limit on the amount you can earn.
It’s important to note that investment income doesn’t count toward these limits; only income earned from working or self-employment is considered.
How Farmers Bank & Trust Can Help
As a Farmers Bank & Trust customer, you have free access to Retirement Simplified, powered by Silvur. This tool provides insights into how the latest COLA adjustment impacts your retirement plan and helps you make informed decisions about Social Security, Medicare, and more.
To access Retirement Simplified, log in to MyFarmers Online Banking or the MyFarmers Mobile App and scroll down to find the section.
Sign up today to explore retirement tools and resources and get answers to key questions like:
- When should I elect Social Security?
- What do I need to know about Medicare?
- How long will my money last?
