COLA Update – American Workers Will Need Higher Earnings in 2025 to Earn Social Security Credits

The 2025 Cost-of-Living Adjustment (COLA) for Social Security will raise benefits by around 2.5%, giving an extra $50 per month on average to recipients. For retirees, this boost helps offset inflation, making it easier to cover day-to-day expenses. However, this adjustment creates a new challenge for low-income workers.

With the COLA increase, workers will need to earn more to gain one Social Security credit, the units required for future benefits. This change affects low-wage workers most, as they now need higher earnings to stay on track for future retirement income. Let’s look into how these changes impact retirees and workers alike.

Impact

In 2025, the earnings required to earn one work credit will increase from $1,730 in 2024 to $1,810, according to the Social Security Administration (SSA). Workers can earn up to four credits per year, so they must earn a minimum of $7,240 annually (four times $1,810) to receive the maximum credits, compared to $6,920 in 2024.

This requirement is directly tied to the COLA, which annually adjusts both Social Security benefits and the credit earnings threshold to align with inflation. This setup keeps Social Security a dependable income source for retirees, ensuring their benefits maintain purchasing power over time. Yet, low-income workers may find it harder to qualify for full benefits in the future, as the credit threshold continues to rise.

Credits

Earning credits is essential to qualify for Social Security retirement benefits. Workers need a minimum of 40 credits, usually gained over at least 10 years of work, to qualify. A person can earn up to four credits per year, regardless of additional income, so it typically takes a decade to reach the required 40 credits. The table below shows recent changes in earnings required to earn one credit:

The data shows how the threshold has gradually increased. While $1,320 was sufficient in 2018, the 2025 threshold of $1,810 marks an increase of $490 over seven years.

History

Social Security credit requirements have consistently increased, following economic trends and inflation adjustments. In 1978, only $250 was required to earn one credit, but by 1988, the amount increased to $470. Fast forward to 1998, and the threshold had doubled to $700. By 2008, it reached $1,050, and in 2018, it stood at $1,320. The table below shows how this amount has grown over the years:

These increases align with broader economic changes and are part of Social Security’s ongoing adjustments to maintain program sustainability.

Challenges

Low-wage workers face significant challenges meeting the rising earnings threshold. Many part-time workers or those in lower-paying jobs may find it increasingly difficult to reach the required earnings to earn credits. For workers in service roles or industries with variable hours, qualifying for future Social Security benefits could become a struggle, as they may not meet the annual minimum income.

While the COLA increase aids retirees with a modest bump in their benefits, it adds an extra barrier for future beneficiaries, especially low-income workers. With these credit requirements rising every year, low-income workers may have to consider working longer or finding additional income sources to qualify for Social Security benefits in retirement.

In summary, while the 2025 COLA increase is beneficial for retirees, it raises new obstacles for low-wage workers. By staying informed about Social Security credit requirements, workers can plan effectively for their retirement income and make sure they stay on track to meet eligibility for future benefits.

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