Social Security deductions are one of those topics that don’t really come up until two things happen: 1) our loved ones reach the retirement age where they can apply for benefits, or 2) we grumble about the chunk of money taken out of our (bi)weekly paychecks. With a presidential election happening now, the topic of Social Security and Supplemental Security Income (SSI) has come up more often than not. Specifically, Millennials and Gen Zers are being told that only 75% of the benefits will be covered by 2035, and younger voters want to know how either candidate plans to fix this. For those who are already receiving these benefits, there’s a new discussion on the table: the 2025 Social Security COLA increase.
SSI benefits for more than 72.5 million Americans will increase 2.5% next year. The cost-of-living adjustment (COLA) increase will cover benefits payable to nearly 68 million SSI beneficiaries in January 2025. Additionally, increased payments to nearly 7.5 million SSI recipients will begin on December 31, 2024.
Who Receives Social Security Benefits?
SSI benefits don’t solely go to senior citizens. People with disabilities may also qualify for these funds, and those funds are calculated by “work credits.” Workers earn four work credits per year, based on their annual earnings. As general wage levels rise, so do the earnings for a work credit.
This year, workers earned one SSI and Medicare credit for every $1,730 in covered earnings. In order to get all four work credits in the same year, they would need to earn $6,920 by year-end. It’s very possible for this to happen based on this person’s annual total wages with a traditional employer or from self-employment income. But again, as general wage levels rise, this amount may change.
So what happens if that same worker ends up needing SSI earnings? Let’s say a 32-year-old real estate investor gets into a serious car accident. According to the work credit chart, this person would need to have earned a minimum of 20 credits in the past 10 years in order to be covered under SSI.
If this same investor was between the ages of 24 to 31, the recipient would be required to have worked half the time between ages 21 and the time when the disability started.
To qualify under the age of 24, the recipient must have six work credits earned in the three-year period ending when the disability started.
Family members, surviving spouses and dependent children may also qualify to receive this SSI earner’s funds for various reasons. They must be a U.S. citizen or a lawfully present noncitizen though.
Why Is The 2025 Social Security COLA Increase Happening?
COLA is the reason behind this new SSI payment increase. While an eligible individual may have received $11,321.49 this year, this same person will get a $967 higher payment totaling $11,604.53 next year. Eligible couples will also get an increased amount; they’ll go from receiving $16,980.36 this year to an increase of $1,450 next year, which will total $17,404.87.
This is not the first time that an increase like this has happened. The first COLA, in June 1975, was based on the increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). After 1983, COLAs have been based on increases in the CPI-W from the third quarter of the prior year to the corresponding quarter of the current year in which the COLA became effective.
For current SSI recipients, payment increase notifications should arrive by mail in early December. The simplified COLA notice will be one page, in “plain and personalized language,” and clarify the exact dates and dollar amounts of a person’s new benefit amount plus any deductions.
