There is finally official word from the Bureau of Labor Statistics about the new cost of living adjustment (COLA). This will help millions of Social Security recipients keep up with inflation. Still, the new COLA increase was set 0.9% lower than last year’s increase.
This has caused a lot of worry among beneficiaries, especially retired workers who depend on these benefits to pay their bills in retirement.
It is important to remember, though, that a lower COLA does not always mean bad things. It just means that inflation has gone down, which is good for the economy.
What does the increase in Social Security’s COLA mean?
A cost-of-living adjustment means that starting in 2025, the monthly payments for more than 72 million Americans on Social Security and Supplemental Security Income will go up by 2.5%. This is according to the government.
The Social Security Administration says that the cost of living adjustment (COLA) will go up in January.
This will affect 68 million people who get Social Security. The agency said that the 2.5% increase would start earlier and go into effect in December for 7.5 million people who get Supplemental Security Income.
The most money that will be taxed by Social Security will also go up to $176,100, according to officials. But in December, before they start getting more money in their checks, beneficiaries will get a note explaining the changes to their monthly amounts.
The beneficiaries will get the notices in their My Social Security account page’s message center and they will also be available online. The agency says that emails will be used to let them know about any changes that happen every month.
Starting in 2025, beneficiaries will get more streamlined reports from the Social Security Administration. These reports will include specific information, like the exact amount of each monthly payment and when the money is expected to be sent.
The Social Security Administration says that most recipients will get an extra $50 a month because of the 2.5% rise in cost-of-living adjustments. According to CNBC, the monthly increase for people on SSI and Social Security is the smallest it has been since 2021.
The small rise in monthly payments is due to inflation, according to the Social Security Administration. The cost-of-living adjustment that is given to beneficiaries has also gone down as inflation has slowed down.
The cost of living adjustment (COLA) increase has also gone down every year for the past three years, as the CNBC article said. The research shows that this is different from 2022, when the increase was 5.9%, and this year, when it was only 3.2% among beneficiaries.
COLA increase could lead to beneficiaries having more money and therefore paying more taxes
The Social Security Administration says that benefits are taxed based on the total amount of money that a person makes. According to the agency, about 40% of Americans who get monthly benefits have to pay federal taxes on those benefits.
Most people who get benefits from the government and have to pay taxes on them also make a good amount of money.
The IRS said that if a recipient makes between $25,000 and $34,000 a year, they will have to pay taxes on up to half of their monthly SSI and Social Security payments if they file as an individual.
If the receiver makes more than $34,000 a year, they should expect to pay taxes on about 85% of their monthly payment.
The IRS says that people who file a joint return will have to pay taxes on up to 50% of their monthly benefit if their combined income is between $32,000 and $44,000.
If their combined income is more than $44,000, they will have to pay taxes on 85% of their monthly checks. The IRS says that people who owe money on their federal taxes can choose to have money taken out of their monthly checks for their tax return.
The Vice President of Premier Social Security Consulting, Jim Blair, told MSNBC about this option and the chance that the amount they have withheld might need to be changed because of the 2025 increases.
