Social Security benefits are expected to rise by about 2.5% in 2025 due to the cost-of-living adjustment (COLA). This means people receiving Social Security will see an average increase of $50 per month.
However, there’s some bad news for workers who are trying to earn Social Security work credits.
Due to the COLA increase, they will need to make more money in order to earn one work credit per term. Let’s break down what this means and how it affects both retirees and workers.
What is the Cost-of-Living Adjustment (COLA)?
The Cost-of-Living Adjustment (COLA) is an annual increase in Social Security benefits to help retirees keep up with inflation.
In 2025, the COLA is expected to be about 2.5%. This means retirees will get more money each month, helping their purchasing power as the prices of goods and services go up.
The average increase is expected to be $50 a month for people who receive Social Security benefits.
Impact of COLA on Workers’ Earnings
While the COLA will be a welcome boost for retirees, it’s not great news for workers. In 2025, workers will need to earn more money to get one work credit.
A work credit is necessary for someone to qualify for Social Security benefits in the future.
In 2025, the earnings needed for one work credit will increase from $1,730 to $1,810. This means workers will need to make $80 more than before to qualify for each work credit.
What is a Social Security Work Credit?
A Social Security work credit is something that workers earn based on how much they make each year. You need a total of 40 work credits to be eligible for Social Security retirement benefits.
In one year, you can only earn up to 4 work credits. So, workers need to earn a certain amount of money each year to keep earning credits and eventually qualify for Social Security benefits.
How Much Will Workers Need to Earn in 2025?
In 2025, a worker will need to earn $1,810 to get one work credit. This is an increase of $80 compared to 2024.
Over the course of the year, this adds up. In total, workers will need to earn $7,240 in 2025 to get the full 4 work credits for the year. This is $950 more than in 2024, when workers needed to earn $6,290 to reach 4 credits.
Historical Changes in Social Security Work Credits
Social Security credits have steadily increased over the years due to inflation. Back in 1978, it cost just $250 to earn one credit. By 1988, this had increased to $470, and in 1998 it was $700.
By 2008, the amount required had reached $1,050, and by 2018, it had risen to $1,320. As you can see, the amount needed to earn one work credit has been increasing year after year.
The COLA increase in 2025 will help retirees with an extra $50 per month, but it will also mean that workers need to earn more money to get Social Security work credits.
While the COLA makes life easier for those already receiving benefits, it puts more pressure on workers, especially those with lower earnings.
Understanding these changes can help people plan for their future, whether they are working or already retired.
What is COLA?
COLA stands for Cost-of-Living Adjustment, which helps Social Security benefits keep up with inflation. It increases benefits annually.
How much will Social Security benefits increase in 2025?
Social Security benefits are expected to rise by about 2.5%, which means an average increase of $50 per month for beneficiaries.
What is a Social Security work credit?
A work credit is earned based on the amount you work and earn. You need 40 work credits to qualify for Social Security retirement benefits.
How much will I need to earn to get one Social Security work credit in 2025?
You will need to earn $1,810 in 2025 to get one Social Security work credit, up from $1,730 in 2024.
Why are work credits increasing?
The amount needed to earn a work credit increases every year because of inflation and the COLA adjustments made to Social Security benefits.
