This year, around 72.5 million Social Security recipients are set to see their payments increase by 2.5%. This adjustment comes from the annual cost-of-living adjustment (COLA) designed to help beneficiaries keep up with rising expenses.
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Why the COLA Matters
As prices rise due to inflation, the value of money decreases. This can make everyday essentials like groceries and utilities harder to afford. The COLA ensures Social Security payments grow to match inflation, helping retirees and other beneficiaries maintain their purchasing power.
For more information on how these adjustments impact retirees, check out our article on Social Security $5,108 Monthly Checks in 2025.
What Is the COLA?
The COLA has been part of Social Security since 1975. It’s calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Here’s how it works:
- The average CPI-W for the third quarter of the current year is compared to the same period from the previous year.
- If there’s an increase, it’s rounded to the nearest tenth of a percent.
- This figure becomes the new COLA.
How Much Will Payments Increase?
The Social Security Administration (SSA) announced in October 2024 that benefits for 2025 would rise by 2.5%. Here’s what that looks like:
| Benefit Type | 2024 Monthly Amount | 2025 Monthly Amount | Increase |
| Average Social Security | $1,927 | $1,975 | $48 |
| Maximum SSI | $943 | $967 | $24 |
For the average Social Security recipient this increase means an extra $576 over the course of the year.
When Will Payments Reflect the Increase?
- Supplemental Security Income (SSI): Payments increased starting December 31, 2024.
- Social Security Retirement Benefits: The new rates took effect on January 1, 2025.
What Experts Are Saying
Not everyone is thrilled with the COLA increase.
Kristin Petersmarck president of New Horizon Retirement Solutions shared her concerns:
“Most people depend on Social Security for about half of their retirement income. A 2.5% increase might feel small, especially with grocery prices still high. But historically, COLA increases have often been lower than inflation. This isn’t a bad sign overall.”
Meanwhile, Cliff Ambrose, founder of Apex Wealth, added:
“When inflation slows down, prices stabilize, and retirees need smaller adjustments. While this year’s COLA isn’t huge, it’s a sign that prices aren’t rising as quickly, which is good news for retirees.”
What’s Next?
The next COLA adjustment will be announced in October 2025. Until then, benefits will remain at their current levels.
If you want to know how other changes might affect your benefits, you can read our article on Social Security Updates Everyone Can Expect in 2025.
FAQs
1. What is the purpose of the COLA?
The COLA adjusts Social Security payments to keep up with inflation, ensuring recipients maintain their purchasing power.
2. How is the COLA calculated?
It’s based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) during the third quarter of the year.
3. When will the next COLA be announced?
The next COLA will be announced in October 2025 and will take effect in January 2026.
Final Words on Social Security Update
The 2.5% COLA increase is a small but significant step to help Social Security beneficiaries keep up with inflation. While it may not cover every rising cost, it provides a cushion for retirees and other recipients who rely on these payments.