According to the latest estimate, the projected social security cola increase for 2025 will be 2.63%. In June, forecasters said there would be a 3% increase in 2025 COLA as a prediction.
If the estimate of 2.63% remains accurate until the official announcement of the Social Security COLA in October, it will be the lowest since 2021.
Will There Be A Cola In 2025?
The Social Security COLA announcement date for 2025 is in October. The adjustment is based on third-quarter CPI data, which examines the inflation for urban wage earners and clerical workers for three consecutive months: July, August, and September. If we go by the data from early 2024, there is an indication that the 2025 Social Security COLA update could be approximately 2.7%.
What Is The Purpose Of The Social Security Administration’s Cola?
The SSA fundamentally designs the Social Security cost-of-living increase in 2025 to assist Social Security Disability Insurance and Supplemental Security Income recipients in maintaining their purchasing power amidst rising inflation. The Bureau of Labor’s CPI-W determines the annual increase. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is a measure of the change in prices for consumer goods and services.
However, the Social Security 2025 cola increase disappoints seniors, who have complained that their spending habits do not account for CPI-W. Therefore, in 2025, the COLA will be crucial as seniors struggle to meet their real-life expenses from 2024. According to estimates from the Bureau of Labor Statistics, the average cost of a grocery item has inflated by 24% since the year 2020.
COLA 2025 Predictions
The predicted COLA increase for social security in 2025 is nearly 2.63%, which is less than the 3.2% increase that took place in 2024.
| Year | Social Security COLA% Increase |
|---|---|
| 2025 | The estimated increase is 2.63% |
| 2024 | 3.2% |
| 2023 | 8.7% |
| 2022 | 5.9% |
| July 1975 — 8.0% | January 1984 — 3.5% | January 1992 — 3.7% | January 2000 — 2.5% | January 2008 — 2.3% |
|---|---|---|---|---|
| July 1976 — 6.4% | January 1985 — 3.5% | January 1993 — 3.0% | January 2001 — 3.5% | January 2009 — 5.8% |
| July 1977 — 5.9% | January 1986 — 3.1% | January 1994 — 2.6% | January 2002 — 2.6% | January 2010 – 0.0% |
| July 1978 — 6.5% | January 1987 — 1.3% | January 1995 — 2.8% | January 2003 — 1.4% | January 2011 — 0.0% |
| July 1979 — 9.9% | January 1988 — 4.2% | January 1996 — 2.6% | January 2004 — 2.1% | January 2012 — 3.6% |
| July 1980 – 14.3% | January 1989 — 4.0% | January 1997 — 2.9% | January 2005 — 2.7% | January 2013 — 1.7% |
| July 1981 — 11.2% | January 1990 — 4.7% | January 1998 — 2.1% | January 2006 — 4.1% | January 2014 — 1.5% |
| July 1982 — 7.4% | January 1991 — 5.4% | January 1999 — 1.3% | January 2007 — 3.3% | January 2015 – 1.7% |
| January 2016 – 0.0% | ||||
| January 2017 – 0.3% | ||||
| January 2018 — 2.0% | ||||
| January 2019 – 2.8% | ||||
| January 2020 – 1.6% | ||||
| January 2021 – 1.3% | ||||
| January 2022 – 5.9% | ||||
| January 2023 – 8.7% |
How Much Will My Social Security Benefits Increase In 2025?
The following table highlights an estimated breakdown of Social Security COLA adjustments for 2025 for various recipients:
| Beneficiary Type | Average monthly increase in 2025 (estimated) | Average check amounts: 2025 (estimated) |
|---|---|---|
| Retiree | $50.94 | $1,966.20 |
| Retired couple, both receiving benefits | $101.88 | $3,932.40 |
| A worker with a disability | $40.90 | $1,578.47 |
| Widow or widower | $47.40 | $1,829.17 |
| Children of deceased workers | $29.44 | $1,136.14 |
Table: Social Security Cola Increase 2025 chart
How Is The Social Security COLA Calculated?
The Social Security Administration (SSA) calculates COLA by measuring
- The third quarter of this year saw an increase in CPI-W compared to the same period last year.
The organizations calculate the COLA increase by using the Social Security Cola Increase 2025 calculator, which bases its estimate on the numbers from the consumer price index for the months of July and August, as well as the projections for September.
Social Security benefits are a lifeline for their recipients, and nearly 72.2 million people will receive some form of Social Security benefit in April 2024. You can only get an estimate of the COLA increase, not the actual picture, such as the Medicare Part B premium.
If the premium increases, then the COLA will be low. Let’s understand this better with an example. In 2024, the Medicare Part B premium was $174.70, whereas in 2025 it will be $185, which indicates the potential COLA increase in Social Security for 2025 will be lower than in 2024.
Who receives a COLA?
Social Security retirement recipients are one of the largest groups to benefit from COLA. However, other recipients of disability benefits include individuals who receive
- Supplemental Security Income (SSI)
- A federal program that helps seniors who are 65 or older
- Blind and disabled people
- Individuals who get disability payments also get COLA.
- Military and federal civil service retirees
- Some unions negotiate COLAs in their contracts.
Changes in CPI-W also affect some government programs, such as free school lunches and food stamps.
Why is the COLA increase so important?
The COLA increase may seem insignificant. However, even with a small percentage increase in COLA, it may make a substantial difference in the dollar value over time. For example, the inflation rate was low from 2010 to 2020, which makes the average increase nearly 2.4% every year.
Now, let’s understand what difference this 2.4% inflation can make. Suppose you retire at age 62 today and get a monthly benefit of $2,000. When inflation is at 2.4%, you will receive a monthly benefit of $2,658, which will determine your purchasing power when you are 74 years old.
As ten years pass, you might need $3,370 each month to maintain the same purchasing power as when you first retired. Therefore, when you reach 84 without a COLA, your money will be nowhere near the same as when you started receiving benefits.
COLA is important for people living on a fixed income. The COLA was much higher in 2021, 2022, and 2023. However, people must not assume that Social Security will cover all their bills in retirement. It will be the biggest mistake that people who are about to retire may make.