Social Security Announces 2.5 Percent Benefit Increase for 2025

[Koolau]

We were contemplating when to start our SS checks…I think this puts us “over the top” to start in January’25 now
Woohoo

Welcome to the SS club! I can still remember the days when I thought I'd never get any SS. What a lack of faith on my part!


I'm kinda blown away by how much we get - not that I don't want that extra 2.5%!

Regarding IRMAA, I understand the concept but hate the "cliff" aspect of it. Just another 1st world problem.

 

[G-Man]

NAWI is applied up to the age of 60 only.

Social Security Benefit Amounts

Cost of Living Adjustment

www.ssa.gov

Are you sure about that?

Indexing Factors for Earnings

Cost of Living Adjustment

www.ssa.gov

According to the Social Security AWI factors page (see screenshot below), you enter the year you are eligible for SS benefits (age 62) and use the AWI factors for that year. So, if you are 62 next year, you would enter 2025 and use the AWI factors for that year.

That is my understanding on what AWI factors and bend points to use.

 

[RetiredHappy]

The way I read it is say, you turn 62 this year. Up until you become eligible for SS, ie. at 62, all your wages are adjusted to NAWI up to your 60th age/year of contributions. 61th age/work year contributions are not adjusted. After 62, you go on COLA.

 

[Chuckanut]

Likely my net SS will decrease. I made a mistake in converting too much to a Roth and I think I jumped to a higher IRMAA bracket.

That happens to the best of us. Especially if we haven’t been properly introduced to Aunt IRMAA.

 

[jim584672]

The way I read it is say, you turn 62 this year. Up until you become eligible for SS, ie. at 62, all your wages are adjusted to NAWI up to your 60th age/year of contributions. 61th age/work year contributions are not adjusted. After 62, you go on COLA.

Trying to understand this. So two years of no adjustment?

 

[G-Man]

Trying to understand this. So two years of no adjustment?

My understanding is that age 60 and 61 earnings are not indexed. Only earnings at age 59 and before are indexed.

So, if you enter 2025 in the AWI page, you will notice that age 60 and 61 earnings have an index factor of 1. At age 62, that is when COLA increases begin.

Once again, that is my understanding.

 

[corn18]

Happy to get the increase on my military pension. Will be curious to see what happens to my forecast SS benefits (I am only 58).

 

[Car-Guy]

That happens to the best of us. Especially if we haven’t been properly introduced to Aunt IRMAA.

I have been properly introduced to IRMAA but it still irritates the heck out of me every year. Same could be said for tax brackets too. I tell the DW these are really success taxes.

 

[Exchme]

My understanding is that age 60 and 61 earnings are not indexed. Only earnings at age 59 and before are indexed.

So, if you enter 2025 in the AWI page, you will notice that age 60 and 61 earnings have an index factor of 1. At age 62, that is when COLA increases begin.

Once again, that is my understanding.

View attachment 52650

Because of when the data is available, it's a two year look back on AWI. If you read further on the SSA site, you will see that the first data when the law passed was for folks turning 62 in 1979 and used 1977 AWI data and that pattern of a two year look back continues.

There is no adjustment for anything that happens when you are 61 and then you get a COLA based on the year you turn 62, but that is applied in the year you turn 63.

 

[G-Man]

Because of when the data is available, it's a two year look back on AWI. If you read further on the SSA site, you will see that the first data when the law passed was for folks turning 62 in 1979 and used 1977 AWI data and that pattern of a two year look back continues.

There is no adjustment for anything that happens when you are 61 and then you get a COLA based on the year you turn 62, but that is applied in the year you turn 63.

So if you turn 62 in 2025, what year would you enter to get the correct AWI factors that would be used on wage earnings from age 59 and before?

 

[Out_the_Door]

Would the COLA kick in if benefits are scheduled to begin November 1, 2024 for someone who is just under FRA?

Yes, COLA is applied in January 2025 and will be seen in your February 2025 payment.

 

[Al18]

Ok, thanks for the answer.

 

[5Miler]

2025 Cola increases will be seen in the January SS payments as they are every year.

Social Security Announces 2.5 Percent Benefit Increase for 2025 | SSA

Social Security benefits and Supplemental Security Income (SSI) payments for more than 72.5 million Americans will increase 2.5% in 2025, the Social Security Administration announced today. On average…

blog.ssa.gov

Nearly 68 million Social Security beneficiaries will see a 2.5% COLA beginning in January 2025.  Increased payments to nearly 7.5 million people receiving SSI will begin on December 31, 2024.

 

[corn18]

So if you turn 62 in 2025, what year would you enter to get the correct AWI factors that would be used on wage earnings from age 59 and before?

I use anypia. I just assumed it would take care of all this for me. Is this correct?

 

[Exchme]

So if you turn 62 in 2025, what year would you enter to get the correct AWI factors that would be used on wage earnings from age 59 and before?

The AWI is the one from 2023 (when you were 60), $66,621.80.

Average Wage Indexing (AWI) Series

Cost of Living Adjustment

www.ssa.gov

Each prior year's contribution is factored up by the ratio of the maximum possible in 2023 ($160,200) divided by the actual contribution in that year (the maximum contributions are derived from the AWI series and then rounded off to the nearest $100). If you worked after 2023, any contribution is just used as-is, not adjusted upward.

Then you select the largest 35 years and sum up these adjusted wage indices and divide by 420 (number of months in 35 years), to get the AIME (average indexed monthly earnings).

The PIA is determined by bend point and to go into the weeds on bend points, they are determined by your AWI factor determined by the AWI for 2023 of $66,621.80 divided by the AWI in 1977 of $9779.44 to get the factor of 6.8124. You then multiply that by the 1979 first bend point (notice the 2 year offset) of $180 and round down to the next $ to get your first bend point of $1226. Similarly, the second bend point is your AWI factor x the 1979 2nd bend point of $1085 = $7391. Fortunately you don't actually have to do that bit of math, they provide a table.

Benefit Formula Bend Points

Cost of Living Adjustment

www.ssa.gov

Your PIA will then be 90% of your AIME up to the 1st bend point, plus 32% of your AIME up to the 2nd bend point and 15% of whatever is greater than the 2nd bend point.

If you claim at age 62, your benefit will be 70% of your PIA.

In 2026, you will start getting COLAs.

Whew!

 

[G-Man]

The AWI is the one from 2023 (when you were 60), $66,621.80.

Average Wage Indexing (AWI) Series

Cost of Living Adjustment

www.ssa.gov

Each prior year's contribution is factored up by the ratio of the maximum possible in 2023 ($160,200) divided by the actual contribution in that year (the maximum contributions are derived from the AWI series and then rounded off to the nearest $100). If you worked after 2023, any contribution is just used as-is, not adjusted upward.

Then you select the largest 35 years and sum up these adjusted wage indices and divide by 420 (number of months in 35 years), to get the AIME (average indexed monthly earnings).

The PIA is determined by bend point and to go into the weeds on bend points, they are determined by your AWI factor determined by the AWI for 2023 of $66,621.80 divided by the AWI in 1977 of $9779.44 to get the factor of 6.8124. You then multiply that by the 1979 first bend point (notice the 2 year offset) of $180 and round down to the next $ to get your first bend point of $1226. Similarly, the second bend point is your AWI factor x the 1979 2nd bend point of $1085 = $7391. Fortunately you don't actually have to do that bit of math, they provide a table.

Benefit Formula Bend Points

Cost of Living Adjustment

www.ssa.gov

Your PIA will then be 90% of your AIME up to the 1st bend point, plus 32% of your AIME up to the 2nd bend point and 15% of whatever is greater than the 2nd bend point.

If you claim at age 62, your benefit will be 70% of your PIA.

In 2026, you will start getting COLAs.

Whew!

I'm using this link to enter the year to get the indexing factors.

Indexing Factors for Earnings

Cost of Living Adjustment

www.ssa.gov

If I enter 2023, I get the page below indicating that the person was born in 1961. The person in question was born in 1963.

If I enter 2025, I get the page below indicating that the person was born in 1963. The person in question was born in 1963. So, would I enter 2025, to get the correct indexing factors.

My assumption is that when I enter 2025, I'm getting the wage indexing factors for 2023.

I'm I still confused? Please advise.

 

[Exchme]

My assumption is that when I enter 2025, I'm getting the wage indexing factors for 2023.

That's correct, the numbers used for people first eligible for SS in 2025 is the AWI from 2023, which is what I quoted you.

 

[G-Man]

That's correct, the numbers used for people first eligible for SS in 2025 is the AWI from 2023, which is what I quoted you.

Ok.. now I’m clear. Thanks for being patience with me.

 

[Exchme]

G-Man:
No problem. Glad you brought it up, going through it helped me finally get it straight too. I had an unlocked spreadsheet I had downloaded from somewhere years ago that calculated my wife's benefit exactly right. Using that, the SSA.gov explanation finally clicked.

 

[corn18]

So when I use anypia to calculate my PIA, does it account for all of this?

 

[Luvtoride]

Regarding IRMAA, I understand the concept but hate the "cliff" aspect of it. Just another 1st world problem.

At the risk of being “stoned” here for saying this, yesterday we just got our reimbursement payment from my DW Pension provider for our 2023 IRMAA premiums we paid (first partial year on Medicare). Have to love Public Employees Pension Funds!

 

[Chuckanut]

Regarding IRMAA, I understand the concept but hate the "cliff" aspect of it. Just another 1st world problem.

Yes, it’s the cliff aspect of it that is so unfair and makes it hard to plan for. With modern computers, one would think they could have made it function more like the tax brackets. They would still have to collect the same amount of money, but, IMO, it would be fairer.

 

[Winemaker]

When I look at my SS statement online. does it now reflect the 2.5% increase?

 

[corn18]

When I look at my SS statement online. does it now reflect the 2.5% increase?

I don't think so but not positive on that.

 

[Al18]

I believe the SS statements are usually updated the beginning of November