With the country well aware of how much is at stake, the latest projections put the 2025 Social Security cost-of-living adjustment at translating into a 2.6% increase in benefits next year for beneficiaries. According to the nonpartisan senior advocacy group The Senior Citizens League, this projection puts it at the average COLA over the last twenty years.
Calculating the 2025 COLA
The annual cost of living adjustment for Social Security is based on the inflation rate for the third quarter of the year-the three months of July through September. The SSA uses the consumer price index for urban wage earners and clerical workers, known as the CPI-W to measure that inflation rate.
If the average for the third calendar quarter of the current year exceeds that of the previous year, the COLA becomes effective and it increases the COLA by that difference. The increase would then be applied starting in January of the subsequent year.
Effects on average benefits
Compared with the latest data from the Social Security Administration, in August 2024, the average monthly benefit for retired workers was $1,920. A 2.6% COLA for 2025 translates to an average increase of $49.92 per month, making the average benefit $1,969.92.
The impact of the COLA varies based on the type of beneficiary:
- Retired workers: Average benefit increases from $1,920 to $1,969.92, which translates to a $49.92 increase
- Spouses: Average benefit rises from $910 to $932.66 ($22.66 increase)
- Survivors: Average benefit rises from $1,509 to $1,548.74 ($39.74 increase)
- Disabled workers: Average benefit rises from $1,540 to $1,579.84 ($39.84 increase)
Comparison to previous years
The 2.6% COLA estimate for 2025 is smaller compared with increases in recent years. Beneficiaries received a 3.2% COLA in 2024, while the 2023 adjustment was a significant 8.7%, the biggest in four decades. The 2022 COLA was also robust at 5.9%.
The 2.6 percent estimate for 2025 is equal to the average COLA over the past two decades also 2.6 percent. That fact incorporates the reality that the period includes a mix of three years-2010, 2011 and 2016-when no COLA was passed along due to deflation, and the smallest positive COLA on record, 0.3 percent in 2017.
Impact on retirees
While a 2.6% COLA may seem modest in comparison with the raises of recent years, it is a significant boost that would help offset the rising costs facing retirees. But other experts say the current COLA formula doesn’t accurately capture expenses felt by seniors-particularly when it comes to essentials like healthcare and housing.
The Senior Citizens League has so far recommended that if the Consumer Price Index for the Elderly, or CPI-E, is used instead of the CPI-W, it would be much closer to the real rate of inflation retirees face. Not all experts agree to this change in measuring, though; the current method generally has compensated for inflation over time.
Although the official 2025 Social Security COLA will not be announced until October, the latest projections from the Senior Citizens League indicate beneficiaries should expect a 2.6% increase in their benefits next year. This is below the large adjustments over the past few years, but it does follow the long-term average and thus will go some distance toward keeping up with the growing expenses retirees experience.
