Each year, the Social Security Administration introduces changes for the benefit of recipients of Social Security. While many of these revisions are often welcomed, 2025 is set to be a year where some more painful changes are expected to be made. These changes could have a significant impact on those who rely on Social Security for their primary source of income.
New COLA increase, but buying power is not the same
The new 2025 Social Security cost-of-living adjustment (COLA) is set at 2.5%, marking the smallest increase since 2020. This will add roughly $49 to the average retiree’s monthly benefits. While it’s better than nothing, many seniors who depend on Social Security can attest that it’s not nearly enough to cover their rising expenses.
Despite annual COLAs, which are intended to help recipients keep up with inflation, Social Security’s buying power has decreased by 20% since 2010, according to The Senior Citizens League (TSCL). To restore the same buying power retirees had 15 years ago, they would need an additional $4,442 per year. The COLA also brings some relief for those dependent on SSI. In 2025, the maximum monthly SSI payment increases to $967 for individuals and $1,450 for couples, up from $943 and $1,415, respectively, in 2024.
No benefit deductions, but expenses still run high
Individuals who begin claiming Social Security benefits before reaching full retirement age will experience a temporary reduction in their payments if they earn too much income while receiving benefits. In 2025, the income test limit increases from $22,320 to $23,400. For every $2 earned above this threshold, the SSA will deduct $1 from benefits. For those who will reach full retirement age in 2025, the income limit rises to $62,160, with a $1 deduction for every $3 earned over that amount.
Although the increase in the income test limits may provide some relief, it could still present a challenge for many recipients. Even with the higher thresholds, individuals who need to supplement their Social Security benefits with additional income may still find their payments reduced significantly if they exceed the limit. This creates a barrier for those who rely on part-time or seasonal work to meet their financial needs, as they must carefully balance their earnings to avoid benefit cuts. In many cases, the reduction in benefits may outweigh the additional income, discouraging recipients from working or earning extra money, despite their need to do so.
Monthly payments are higher, but recipients still struggle to cover expenses
While the new COLA increase has raised the average amount of payments recipients of Social Security receive each month, the increase is far from extraordinary. The real-world result of the 2.5% COLA is a higher average monthly benefit payment, with the average Social Security payment rising from $1,788.12 at the end of 2024 to $1,976 in January 2025. While this increase may provide some relief, it still falls short of offsetting the rising costs of living for many seniors, leaving them with limited purchasing power.
Seniors are among the most vulnerable members of society, often facing financial instability due to incomes that are not always sufficient to cover rising living expenses. As the cost of essentials like housing, healthcare, and food continue to increase, many seniors find themselves struggling to make ends meet. With limited opportunities for additional income, especially for those who are retired or dealing with health issues, they are at constant risk of falling behind.
Even with annual cost-of-living adjustments, these increases often don’t keep pace with inflation, leaving seniors with reduced purchasing power. This financial strain can affect their overall well-being, forcing them to make difficult choices between necessities, and highlighting the urgent need for more robust support for older populations. With a new president, many seniors may be expecting more support to be introduced.
