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Call your grandma — she just got a raise. The Social Security Administration announced Thursday that the Social Security cost-of-living adjustment for 2025 will be 2.5%.
Abbreviated COLA, the annual adjustment helps the payments for more than 72 million Americans, the vast majority of them retired, keep pace with rising prices. Because inflation has largely abated from its peak in recent years, the 2025 COLA is smaller than it has been lately.
It's 0.7 percentage points less than the 2024 COLA, which was 3.2%, and significantly lower than the blockbuster 8.7% raise beneficiaries received in 2023.
“Social Security benefits and SSI payments will increase in 2025, helping tens of millions of people keep up with expenses even as inflation has started to cool,” Martin O’Malley, commissioner of Social Security, said in a news release.
How much will the 2025 COLA increase Social Security?
According to a fact sheet published Thursday, the average Social Security retirement payment will increase by $49 thanks to the 2025 COLA. That will bring the typical monthly payment for retired workers up to $1,976 in January.
It's important to remember not all Social Security recipients are retirees. Roughly 60 million people get retirement benefits, and 8 million get disability insurance. In addition, about 7 million Americans receive Supplemental Security Income, or SSI, which is intended to help adult and children with little to no income and little to no resources who are blind, disabled, or age 65 and up. (Some folks get both SSI and Social Security.)
The COLA will be applied to all of those benefits.
When will the first Social Security checks with the 2025 COLA go out?
The 2025 COLA will show up in payments on and after Dec. 31. That's because although it's intended for the following year, SSI payments for January are going out early due to the first falling on a federal holiday (New Year's Day).
The 2025 Social Security payment schedule can be found on the Social Security Administration's website.
How was the 2025 COLA calculated?
The Social Security Administration calculates each year's COLA by looking at the increases in a special inflation gauge called the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. It takes the CPI-W for each month in the third quarter — July, August and September — and averages them together, then compares it to the previous year's third-quarter average. The percentage difference is the COLA.
In July 2024, the CPI-W was 308.501; in August, it was 308.640; and in September, it was 309.046. Those averaged together give 308.729.
Last year's third-quarter CPI-W was 301.236. Because 308.729 is 2.49% higher than 301.236, the COLA is 2.5%.
Social Security COLA history
Historically speaking, the 2025 COLA is a bit smaller than the average. When you look at data going back to 1975, the typical COLA has been just under 3.8%. That said, the COLA bump for 2025 is in line with recent increases; the Social Security Administration notes that the average raise over the past decade is 2.6%.
The highest COLA ever took effect in 1981, when Social Security payments increased by 14.3% after inflation reached 14.6% in 1980. Several years — among them 2010, 2011 and 2016 — had no COLA at all.
year effective | cost-of-living adjustment |
|---|---|
2019 | 2.8% |
2020 | 1.6% |
2021 | 1.3% |
2022 | 5.9% |
2023 | 8.7% |
2024 | 3.2% |
Will the 2025 COLA be enough?
The Senior Citizens League, an advocacy group, reported in August that everyday expenses are increasingly eating into older adults' monthly income.
TCSL survey results show that 65% of older adults now have monthly expenses exceeding $2,000 — a 10-percentage-point surge from the previous year. Another 63% say they're concerned their income won't cover basic needs like food, housing and medicine in the near future.
COLAs help, but not much: In July, TSCL put out research that showed the average Social Security payment for retirees has lost 20% of its value since 2010.
"The reality is that COLAs have become less and less likely to match inflation over time," the group wrote in a news release. "Without an accurate cost-of-living adjustment (COLA) that keeps pace with rising costs, beneficiaries lose purchasing power, especially over the course of a retirement that could last 25 to 30 years. This loss is cumulative and grows deeper as retirees age."
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