by Calculated Risk on 10/10/2024 08:56:00 AM

With the release of the CPI report this morning, we now know the Cost of Living Adjustment (COLA), and the contribution base for 2025.

From Social Security: Social Security Announces 2.5 Percent Benefit Increase for 2025

Social Security benefits and Supplemental Security Income (SSI) payments for more than 72.5 million Americans will increase 2.5 percent in 2025, the Social Security Administration announced today. On average, Social Security retirement benefits will increase by about $50 per month starting in January.

Over the last decade the COLA increase has averaged about 2.6 percent. The COLA was 3.2 percent in 2024.
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Some other adjustments that take effect in January of each year are based on the increase in average wages.  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.

Currently CPI-W is the index that is used to calculate the Cost-Of-Living Adjustments (COLA). Here is a discussion from Social Security on the current calculation (2.5% increase) and a list of previous Cost-of-Living Adjustments.

The contribution and benefit base will be $168,600 in 2024.

The National Average Wage Index increased to $ 66,621.80 in 2023, up 4.4% from $63,795.13 in 2022 (used to calculate contribution base).