Social Security announces 2025 cost-of-living adjustment for benefits
- The 2025 cost-of-living adjustment (COLA) for Social Security benefits will be 2.5%, relatively in line with expectations and the 20-year average of 2.6%. The COLA is based on the rate of inflation (specifically, the CPI-W), and the 2025 increase reflects a continued slowdown in price increases and a return to a more normalized level.
- This boost in benefits can help retirees better meet their day-to-day needs as costs increase. It may allow them to maintain or even reduce how much they need to withdraw from their investment portfolio, which can be especially beneficial in volatile and down markets. How much you withdraw from your investment portfolio each year plays the biggest role in ensuring your money lasts through retirement. While stocks may be near record highs, small adjustments, such as reducing your withdrawals when the inevitable down market occurs, can have a meaningful impact on your portfolio's longevity.
- Social Security recipients could also put those extra dollars toward their cash reserves. We generally recommend retirees maintain 12 months' worth of portfolio withdrawals in cash in a separate spending account and another three to five years of portfolio withdrawals in a short-term fixed-income ladder. We also recommend retirees hold another three to six months of spending in an emergency fund. Maintaining appropriate cash reserves can help you prepare for potential market declines, ensuring your retirement spending needs can be met while allowing your stocks more time to recover.
- In addition to the COLA, the Social Security Administration also announced the 2025 adjustments for other items, including the maximum taxable earnings amount ($176,100) and the earnings limit for retirees who file before reaching full retirement age ($23,400 for years before reaching full retirement age, $62,160 for the year a retiree reaches full retirement age).
The above chart provides the annual cost-of-living adjustments (COLA) for Social Security from 1976 through 2025. The highest annual COLA during this time period was 14.3% and the lowest was 0%.
The above chart provides the annual cost-of-living adjustments (COLA) for Social Security from 1976 through 2025. The highest annual COLA during this time period was 14.3% and the lowest was 0%.
* The Social Security Administration has additional information that you may find useful. This information is provided as a courtesy and is intended for informational purposes only. Edward Jones makes no representations concerning the content of this site.
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