Social Security will boost payments for eligible individuals – Up to $50 more per month

As inflation continues to impact daily living costs, Social Security’s annual Cost of Living Adjustment (COLA) aims to help beneficiaries keep up. Every October, the Social Security Administration (SSA) announces the COLA increase for the upcoming year, which directly affects Social Security Disability Insurance (SSDI) recipients, retirees, and other beneficiaries. While the final COLA percentage for 2025 is not yet official, it is expected to hover around 2.5%, translating to a modest $50 per month increase for some SSDI recipients.

COLA

COLA was first introduced in 1975 to automatically adjust Social Security benefits according to inflation. The adjustment is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures changes in the prices of essential goods and services. By comparing the third-quarter CPI-W of the previous year to the current year, the SSA determines whether to increase benefits and by how much.

Before 1975, any changes to Social Security benefits required legislative approval. Today, COLA adjustments are mandatory and ensure that benefits retain their purchasing power in an ever-changing economic landscape. For 2024, beneficiaries saw a 3.2% increase in their checks, while the upcoming 2025 COLA is expected to be a smaller 2.5% due to easing inflation.

SSDI

Social Security Disability Insurance (SSDI) provides monthly cash benefits and Medicare coverage to individuals who are unable to work due to a qualifying disability or blindness. To qualify for SSDI, recipients must meet the following criteria:

• Work History: Must have worked at least five years in the last decade if aged 24 or older.
• Earnings Limit: Must not exceed the Substantial Gainful Activity (SGA) income limit, which is set at $1,550 per month or $2,590 per month for blind individuals in 2024.

The average monthly SSDI payment in 2024 is $1,665.14, and the maximum amount is $3,822. If the COLA increases by 2.5% as expected, beneficiaries who currently receive $2,000 per month will see their payments rise to approximately $2,050 per month in 2025. Although the increase may seem modest, it can make a significant difference when managing essential expenses.

Impact

Unfortunately, SSDI recipients might not feel the full benefit of the COLA adjustment due to rising Medicare premiums. For 2025, Medicare Part B premiums are expected to increase by about $10.30 per month, which will automatically be deducted from some SSDI recipients’ benefits. As a result, the net increase from the COLA may be slightly reduced, depending on individual circumstances.

While this automatic deduction can be frustrating, the remaining increase will still provide some relief for covering other essentials like groceries and utilities.

Benefits

COLA doesn’t just impact SSDI recipients. It applies to all Social Security benefits, including retirement, survivors, and Supplemental Security Income (SSI) programs. With inflation gradually stabilizing, this year’s COLA is expected to be lower than the record 8.7% adjustment seen in 2023 but still higher than the 1.52% average annual COLA before the COVID-19 pandemic.

Financial Security

SSDI plays a critical role in reducing financial stress for millions of Americans. A 2021 study found that SSDI benefits decrease the risk of bankruptcy for recipients by up to 20%. As of the end of 2020, over 9 million Americans received SSDI benefits, including spouses and children of disabled workers. The majority of SSDI beneficiaries (72%) are between the ages of 50 and 66, making SSDI a lifeline as they transition to retirement age.

With the COLA adjustment, SSDI helps maintain financial stability, offering a safety net for disabled individuals who cannot work. The additional $50 per month may seem minor, but for many, it can be the difference between covering medication costs or putting food on the table.

Final Thoughts

Although the 2025 COLA increase may not be as significant as past years, any increase in benefits is vital for those relying on Social Security. Beneficiaries should mark October on their calendars to stay informed about the final announcement and prepare for the first COLA-adjusted checks in January 2025. Keep in mind that while the rise in Medicare premiums may eat into the increase slightly, every bit of support helps maintain financial security.

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