As you may know, the fourth quarter of the year starts in October. That is also when the Social Security Administration starts to talk about big changes coming up in the next year.
The program is always changing, which can be confusing for retirees, but some of the changes are for the better. Two important numbers that retirees should know about as 2025 draws near are the cost-of-living adjustment (COLA) and the higher wage base limit.
These were just released by the Social Security Administration (SSA). These two numbers have an effect on both people who are already getting Social Security benefits and people who have not yet claimed their benefits.
3 changes that will impact Social Security checks will change in January
A few times a year, the SSA changes the amount of money people get each month by a certain percentage to help pay for these rising costs. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is used to figure out the annual COLA.
The cost of things like food, transportation, and household items that hourly and salaried workers buy every day is measured by this index.
The COLAs are found by taking the percentage difference between the average CPI-W for the three months in Q3 (July, August, and September) and the average CPI-W for the same three months the previous year.
What should Social Security beneficiaries expect from the next COLA increase in 2025?
Even though the cost of living adjustment (COLA) was set at 2.5%, this amount is good news because it could be even higher. The 2.5% COLA is less than the norm and is the smallest increase since 2021.
The good news is that prices are going up less quickly now. Please read the following to find out more about the last COLAs in the United States:
| Year | COLA increase |
| 2015 | 1.70% |
| 2016 | 0% |
| 2017 | 0.30% |
| 2018 | 2% |
| 2019 | 2.80% |
| 2020 | 1.60% |
| 2021 | 1.30% |
| 2022 | 5.90% |
| 2023 | 8.70% |
| 2024 | 3.20% |
Keep in mind that the 2016 COLA was 0%. In this case, the CPI-W numbers for one year are the same as or less than those for the previous year.
If the CPI-W data stays the same or goes down, the program will never cut monthly benefits. It will only raise benefits if the CPI-W data goes up.
The earning base limit will also increase next year
What you make each year that is the most you have to pay in Social Security payroll taxes is called your “annual wage base limit.” For 2025, the new minimum wage is $176,100.
This means that any money over that amount is not subject to Social Security payroll taxes, which are 12.4% if you work for yourself and 6.2% if you have an employer.
The SSA also figures out the annual wage base limit using the National Average Wage Index (NAWI). This index shows the average yearly wage for workers who are eligible for Social Security.
One year’s NAWI is compared to the previous year’s to see if the NAWI should be raised. If the APL is the same as or less than the wage base limit, it will not change. It is not going to fall. Here is a list of the ten salary base restrictions that came before:
| Year | Wage Base Limit |
| 2024 | $168,600 |
| 2023 | $160,200 |
| 2022 | $147,000 |
| 2021 | $142,800 |
| 2020 | $137,700 |
| 2019 | $132,900 |
| 2018 | $128,400 |
| 2017 | $127,200 |
| 2016 | $118,500 |
| 2015 | $118,500 |
Why is the earnings base limit relevant for Social Security beneficiaries?
The main reason to be worried about the wage base limit is how it affects taxes. If this limit changes, it could affect how much Social Security tax you have to pay if your earnings are in this range.
The second reason to worry about the wage base limit is that it can change your ability to get the biggest Social Security benefit when you finally decide to claim it.
You have to wait until you are 70 years old to start getting benefits, and you have to earn at least the base amount every year for 35 years for the SSA to figure out your payment.
To get the most money each month, you need to make sure that your earnings are higher than the wage base limit.
