In mid-October of each year, the Bureau of Labor Statistics releases its highly anticipated report on changes (usually increases) in the Consumer Price Index over the past 12 months. Why is this little esoteric government report, actually called the Consumer Price Index for Urban Wage Earners and Clerical Workers, so popular? Because for the last 50 years, it is the report that determines the cost of living adjustment (COLA) that Social Security beneficiaries will receive the following year.

Since my column has a long deadline, what I report here is not news to most of my readers. As I’m sure you’ve already heard, checks for 68 million Social Security beneficiaries will increase by 2.5% in 2025.

I’ve always been afraid to mention COLAs in this column because every time I do, I’m inundated with emails from readers complaining that the increase isn’t enough.

But here’s the problem: Many economists and social planners believe Social Security COLAs are too generous! (I’ve explained why in past columns, but I don’t have the space to get into that debate today.) That’s why most long-term reform discussions for Social Security include proposals to reduce cost-of-living increases.

But for now it’s neither here nor there. Let’s go back to the 2025 Social Security COLA. Because of these increases, the average monthly retirement check will be $1,976 in 2025, an increase of $49 from the 2024 level. The maximum Social Security check for a worker reaching full retirement age (FRA) in 2025 will be $4,018, compared to $3,822 in 2024. Please note that the maximum for an individual entering FRA in 2025 is $4,018. This does not mean that this is the maximum. Social Security payment that anyone can receive. Millions of Social Security beneficiaries receive much more than that, primarily because they worked too well past their FRA and/or delayed starting benefits until age 70.

There is another important point about COLA. Many readers ask me if they need to apply for Social Security benefits in 2024 to receive the COLA due in January 2025. The answer is no. The COLA will be included in the benefit calculation formula. So even if you don’t file for Social Security until next year or later, you’ll still get a 2.5% boost.

Although this is a Social Security column, I need to mention the upcoming increase in the Medicare Part B premium that is deducted from Social Security checks for most people. As I write this article, the 2025 base Part B bonus has not yet been announced. However, it is expected to be $185. This is $5.20 more than the 2024 rate. As has been the case for 20 years, the rich will pay more than the basic premium.

I don’t want to get into the complicated topic of Medicare premiums except to make this brief point: Although linked in the minds of most senior citizens, Social Security and Medicare are entirely separate programs and administered by entirely separate federal agencies. and they have completely separate rules and regulations regarding benefits and payment structures. For example, I’ve already explained how Social Security COLAs are calculated. The Part B Medicare premium increase has nothing to do with the Bureau of Labor Statistics’ consumer price index. Instead, by law it must be set at a level that covers 25% of the cost of running the program. Taxpayers get the remaining 75 percent. (Again, wealthy people pay more than the 25% share.)

Another measuring stick, called the “national wage index,” is used to determine increases to other provisions of the law that affect Social Security beneficiaries and taxpayers. This includes increases in the amount of wages or self-employment income subject to Social Security tax, the amount of income required to earn “quarter coverage,” and Social Security earnings penalty limits.

The Social Security taxable earnings base will increase from $168,600 in 2024 to $176,100 in 2025. In other words, people who earn more than $176,100 in 2025 will no longer have Social Security payroll taxes deducted from their paychecks once they reach that threshold. This has always been a very controversial provision of law. (Bill Gates pays the same amount of Social Security taxes as his plumber!) I think it’s a pretty good bet that any eventual Social Security reform package will include an increase in that wage base.

Most people need 40 Social Security work credits (sometimes called “quarter coverage”) to qualify for monthly benefit checks from the system. In 2024, working individuals earned a credit for every $1,730 of their Social Security taxable income. However, no one can earn more than four credits per year. In other words, once you earn $6,920, your Social Security record will be credited with a maximum of four credits, or quarters. In 2025, a credit limit will increase to $1,810; This means you must earn $7,240 to receive the maximum four credits assigned to your Social Security account.

People who are under full retirement age and receive a Social Security retirement or death benefit but are still working are subject to limits on the amount of money they can earn and will still receive their full Social Security check. This limit was $22,320 in 2024 and will be $23,400 in 2025. For every $2 a person earns above these limits, $1 is deducted from their monthly benefits.

In the year a person reaches full retirement age, there is a higher earnings threshold that applies from the beginning of the year until the month in which the person reaches FRA. (Once the person reaches this magic age, the income penalty also disappears.) This threshold increases from $59,520 in 2024 to $62,160 in 2025.

Several other provisions are also affected by inflation increases. For example, people who are receiving disability benefits and trying to work can generally continue to receive those benefits as long as they are not working at a “substantial” level. In 2024, the law defined essential work as any job that pays $1,550 or more per month. In 2025, this will increase to $1,620 per month.

Finally, the Supplemental Security Income base federal payment level for an individual increases from $943 in 2024 to $967 in 2025. SSI is a federal welfare program administered by the Social Security Administration, but it is not a Social Security benefit. Social Security is paid from general revenues, not taxes.

If you have a question about Social Security, Tom Margenau has two books with all the answers. one is called Social Security – Simple and Smart: 10 Easy-to-Understand Factsheets to Answer All Your Social Security Questions. The other is Social Security: 100 Myths and 100 Facts. You can find the books at: amazon.com or other book outlets. Or you can send him an email at: [email protected]. To learn more about Tom Margenau and read past features and see features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at: www.creators.com.