The Social Security Administration (SSA) will implement the cost of living adjustment (COLA) for 2025 sooner than most beneficiaries anticipate. Supplemental Security Income (SSI) recipients will receive their adjustments first, still in 2024.
But first, let us step back and explain how this quirk will occur and how it will affect these and other beneficiaries.
The Social Security COLA
Every year, the SSA adds a COLA to its benefits to ensure that its recipients can keep up with inflation year after year. This is due to the fact that once the benefit base or “primary insurance amount (PIA)” is established, beneficiaries are not entitled to any benefit increases.
Because the COLA increases almost every year, this would quickly deplete their economic resources, which is why the SSA makes the adjustment.
The COLA for Social Security benefits is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the year (July, August, and September) and compared to the same data from the previous year. The resulting number will be used as the new COLA.
The new increase is announced in October, and this year was no exception, with the 10th bringing the news of a 2.5% increase in their benefits beginning in 2025. But, if that’s the case, why would SSI payments be increased in advance?
Supplemental Security Income (SSI) payments
SSI pays monthly benefits to people with disabilities and the elderly who have little or no income or resources. The conditions for receiving these payments are quite strict, as one must be a child or an adult with:
- Little or no income, and
- Little or no resources, and
- A disability, blindness, or be age 65 or older.
Because this payment is intended to help those in greatest need, the limits are quite strict and enforced. For example, SSI is generally available to people who earn less than $1,971, and other sources of income are considered, reducing benefits.
Resources such as vehicles and money in bank accounts should not exceed $2,000 for individuals and $3,000 for couples, though if you are a parent applying for a child, these figures increase by $2,000.
The amount of money one can receive is also strictly regulated. The maximum monthly SSI payment for 2024 is $943 for an individual and $1,415 for a couple; however, for every $2 you earn from work, your SSI payment can be reduced by about $1, and for every $1 you earn from non-work sources, your SSI payment can be reduced by about $1.
If the program is so stringent, how come the increase will be implemented sooner?
Typically, SSI payments are made on the first of each month. The issue with this scheduling is that the first of each month can easily fall on a weekend or a national holiday, disrupting the SSA’s calendar because the agency does not distribute benefits on days when banks are closed and the US Postal Service does not deliver mail.
This means that payments are advanced to ensure that beneficiaries do not face delays in receiving their payments due to holidays or weekends, and that they can always pay their bills on time.
This is what will happen with the first payment in 2025. The payment would naturally fall on the first of the month, which coincides with New Year’s Day.
Due to the New Year’s Day holiday, the SSA has decided to push the payment date to December 31, 2024, with recipients receiving their regular amount plus the anticipated COLA increase for 2025.
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