Knowing when the Cost-of-living adjustment (COLA) of 2025 will be reflected in your Social Security benefits enables you to effectively manage your finances. Here is everything you need to know on the 2025 COLA increase, its timing, as well as the possible effect on your Social Security benefits.
When will the 2025 COLA increase go into effect?
The Social Security Administration (SSA) typically announces the cost-of-living adjustment (COLA) for the upcoming year in October. For the 2025 COLA, that announcement will be made tomorrow, 10th October 2024. But the most important thing to know is when the increase will actually reflect on your benefits.
- COLA increase goes into effect in January 2025. While the announcement will happen tomorrow, the actual adjustment to your Social Security payments will take effect in January. This means that your first check or direct deposit of the year will include the new COLA-adjusted amount.
- For most recipients, the January check will reflect the COLA increase. This applies to those receiving retirement benefits, Social Security Disability Insurance (SSDI), and Supplemental Security Income (SSI).
How is the COLA determined?
Every year, the COLA is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index measures inflation by tracking changes in the prices of everyday goods and services. The SSA uses the percentage increase in this index from the third quarter of the previous year to the third quarter of the current year to determine the COLA for the next year.
- COLA is designed to protect against inflation. The idea behind the COLA is to ensure that your Social Security benefits maintain their purchasing power, even as the cost of living rises.
- Predictions for the 2025 COLA suggest a smaller increase compared to recent years. The Senior Citizens League, a nonpartisan advocacy group, forecasts a 2.5% COLA increase for 2025. This is lower than the 3.2% increase in 2024 and the 8.7% adjustment in 2023.
Who will get the 2025 COLA increase?
The COLA increase affects all Social Security recipients, including those receiving retirement benefits, Social Security Disability Insurance (SSDI), and Supplemental Security Income (SSI). Each of these groups will see their monthly payments rise starting in January 2025.
- Retirement benefits: The most common group affected by the COLA increase is retirees. Whether you began collecting benefits early or waited until full retirement age, your check will be adjusted to reflect the 2025 COLA.
- SSDI recipients: People receiving disability benefits will also see their monthly payments increase starting in January 2025, helping them keep up with rising living costs.
- SSI recipients: Supplemental Security Income beneficiaries, many of whom are low-income seniors and individuals with disabilities, will also see a boost in their payments.
When will you see the COLA increase in your 2025 payment?
While the COLA increase officially goes into effect in January, the exact date you will see it depends on your payment schedule. Here’s how it breaks down:
- For Social Security recipients: If your birthday falls between the 1st and 10th of the month, you’ll typically receive your payment on the second Wednesday of each month. If your birthday is between the 11th and 20th, your payment comes on the third Wednesday. And if your birthday falls between the 21st and 31st, expect your payment on the fourth Wednesday.
- For SSI recipients: Payments are generally made on the first of each month. Since January 1st is a holiday, your first payment reflecting the 2025 COLA will likely be deposited on December 31, 2024.
How much will the 2025 COLA increase be?
Though the formal announcement on COLA is on tomorrow, experts are already forecasting how much your benefits could rise. As previously stated, the Senior Citizens League has suggested a 2.5% increment for the year 2025.
According to the estimates of the Senior Citizens League, a 2.5% increase would result in an average monthly rise of $48 for beneficiaries. This raises the average Social Security retirement benefit to nearly $1,968 per month.
However, this is merely a projection and one should be cognizant of the fact that the actual increment in the COLA will be influenced by the statistics on inflation provided by the Bureau of Labor Statistics.
Will there be other adjustments alongside COLA?
Keep in mind that while the COLA adjustments of Social Security will increase your benefits, there are other factors that could negatively affect the total amount you receive from the SSA. These factors could be increases in the premiums for Medicare which can cause a reduction of your net benefit amount. For example if the premiums for Medicare Part B increase, a portion of the increase you received from the COLA will be lost.
Medicare premiums can affect the total benefits you enjoy. For several seniors, the amount they dish out to Medicare premiums is directly taken from their Social Security income. So basically, if your premiums go up, the payment you will receive after the COLA adjustments will be small. However, for a lot of Americans the upcoming COLA increase will still serve as a boost to their total income.
