Millions of people in Michigan will get a much-needed increase in their Social Security benefits starting in 2025.
According to the Social Security Administration (SSA), there will be a 2.5% increase for nearly 68 million Americans, including almost 2 million retirees in Michigan alone.
This rise in benefits is part of the Cost of Living Adjustment (COLA), which is designed to help Social Security recipients keep up with the cost of inflation.
The change means that people on Social Security will get an average boost of about $50 per month starting in January 2025.
Why Is This Increase Happening?
Social Security Commissioner Martin O’Malley explained in a press release that this increase is necessary to help millions of Americans maintain their quality of life as inflation begins to cool off. He added that the rise in benefits will help people cope with the rising costs of everyday life.
Over the last decade, COLA increases have averaged around 2.6%, but the biggest jump came in 2023 when benefits rose by a massive 8.7%. In 2024, Social Security recipients saw a smaller increase of 3.2%, and now, for 2025, the increase will be 2.5%.
How Many People in Michigan Are Affected?
As of December 2023, about 1.7 million retirees in Michigan were receiving Social Security payments. But the number of people benefiting from these increases is even higher when you factor in others receiving Social Security disability benefits, survivors’ benefits, and payments for children.
Here’s a quick breakdown of the groups in Michigan that will benefit from the COLA increase:
- 1.7 million retirees on Social Security
- 290,000 people receiving Social Security disability benefits
- 127,000 widows/widowers and parents of beneficiaries
- 57,000 spouses of Social Security recipients
- 137,000 children of Social Security recipients
This increase will make a real difference for these groups, who are depending on Social Security to meet their everyday expenses.
How Old Do You Have to Be to Get Social Security Benefits?
To start receiving Social Security retirement benefits, you must be at least 62 years old. However, if you choose to start benefits earlier than your “full retirement age,” your monthly payments will be reduced.
The full retirement age has increased over the years for those born after 1937. For example, if you were born in 1960 or later, your full retirement age is 67. You can visit the SSA website to check how your benefits will change depending on when you choose to start receiving them.
What About Medicare and Other Benefits?
Along with Social Security, many people are also concerned about how Medicare will change. For those enrolled in Medicare, the 2025 benefit amounts should be available through the SSA’s Message Center.
You can find updates and important information about Medicare on the official Medicare website.
How Is the COLA Calculated?
The COLA for Social Security is tied to inflation and the Consumer Price Index (CPI). The SSA calculates the increase based on the change in the cost of goods and services, measured by the Bureau of Labor Statistics.
In simple terms, the COLA ensures that Social Security benefits keep pace with the rising costs of living.
Comparing the 2025 COLA to Other Years
The 2.5% COLA for 2025 is relatively modest compared to some of the larger increases in the past. For example, in 2023, the COLA was 8.7%, the highest increase in decades.
On the other hand, there have been years with no COLA increase at all, like in 2010, 2011, and 2016. Historically, some of the largest COLA increases occurred in the late 1970s and early 1980s, when inflation was much higher.
Can You Make Money While Receiving Social Security?
Yes, you can still earn money while receiving Social Security, but there are rules. For example, if you make more than $62,160 before reaching your full retirement age in 2025, your Social Security benefits will be reduced. For every $3 you earn over that limit, $1 will be deducted from your benefits.
Once you reach full retirement age, there is no limit to how much you can earn, and your benefits will not be affected by your earnings.
How Are Social Security Benefits Funded?
Social Security is funded through payroll taxes. In 2025, the amount of income subject to Social Security taxes will increase to $176,100, up from $168,600.
Employees and employers each pay 6.2% of wages, while the self-employed pay 12.4%. These funds are used to support Social Security payments to those who qualify.
Does Michigan Tax Social Security Benefits?
Good news for Michigan residents – Social Security benefits are not taxed in the state. However, many pension plans are subject to taxes, though recent changes in state law aim to phase out these taxes.
On the federal level, some Social Security benefits may be taxed, depending on your income.
Conclusion
The 2025 Social Security COLA increase is a welcomed change for Michigan’s retirees and others depending on Social Security. With a 2.5% rise, millions in the state will see their monthly payments go up by an average of $50. This increase is part of a broader effort to help Social Security recipients stay ahead of inflation and continue to manage their day-to-day costs.
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