The Outlook Is Grim for Retirees Hoping for a Reasonable Social Security COLA in 2025
Updated:
By: Timothy Moore, CFEI®
Writer
Fact checked by: Christopher Hensley, RICP®, CES™
Financial Advisor
We’ve got bad news for retirees struggling to beat inflation. Unfortunately, the latest calculations suggest that the adjustment to Social Security payments in 2025 may not be enough to combat rising costs. In 2024, the Social Security Administration increased check amounts by 3.2% in response to changes to the Consumer Price Index, but new data from The Senior Citizens League suggests even that bump was barely enough to offset household expenses. The bad (worse?) news? The COLA for 2025 doesn’t look to be much better.
So far, reports estimate that the 2025 cost-of-living adjustment will be just 2.66%, an increase of approximately $45. Should estimates hover at this rate, the 2025 COLA would be the lowest increase in four years.
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The Social Security Cost-of-Living Adjustment (COLA) Forecast for 2025
In April, the Senior Citizens League (TSCL) adjusted their 2025 COLA forecast to 2.66% after the April CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) came in at 3.4%.
While the Social Security Administration (SSA) will not calculate the official COLA for 2025 until the Labor Department releases its September inflation report in October, older Americans may find that the current numbers just don’t add up.
In a survey conducted by TSCL, 43% of seniors reported that their household expenses increased by $185 per month in 2023. Meanwhile, the 2024 COLA only bumped Social Security payments by $58 bucks (3.2%).
The survey also found that 71% of individuals said their household costs rose more than 3.2% in 2023 (the year used to determine the 2024 COLA). Should the current COLA estimate of 2.66% hold firm for 2025, many retirees will find it harder to afford the things they need, like groceries and medication.
The cost-of-living adjustment is determined by calculating the percent change between average prices in the current year’s third quarter and the previous year’s third quarter. Last year, the full-year CPI-W increased 3.8%, but the third-quarter CPI-W increased just 3.2%, meaning that Social Security benefits are failing to keep up with inflation. Benefits will continue to lose buying power as long as the CPI-W inflation is greater than 3.2%.
Keep in mind: Most Social Security beneficiaries have Medicare Part B premiums deducted from their benefits, which would reduce how much seniors actually get in their monthly benefit payout. The Medicare Trustees Report predicts a roughly $10 increase in monthly premiums for Medicare Part B in 2025.
Read More: How Much Social Security Will I Get?
How Much Was the 2024 Social Security COLA Increase?
The 2024 Social Security COLA increase was 3.2%, or about $58 dollars more a month. This fell well short of the $146 per month average increase beneficiaries saw after the 8.7% COLA in 2023.
This small spike was a surprise for many seniors, even though inflation had been trending downward. Usually, as inflation falls, so does the promise of a large cost-of-living adjustment for Social Security benefits.
But even with a small jump, it’s rare that seniors find the cost-of-living adjustments match up with the cost increases they personally see just about everywhere else. In fact, Retirement Living found that 22% of baby boomers plan on delaying their retirement due to an impending recession.
Annual Social Security Cost-of-Living Adjustments
In October 2024, the SSA calculated third-quarter inflation by averaging July, August, and September Consumer Price Index data, then compared it to the third-quarter average from 2023. The SSA officially set the COLA for 2024 by calculating the difference between those two numbers. They’ll do the same for 2025.
Due to rising inflation over the past decade, the SSA has made large cost-of-living adjustments so far this decade. For instance, the 2023 Social Security COLA was 8.7% — the largest in four decades. (The largest cost-of-living adjustment ever was in 1981, when Social Security benefits increased by 14.3%). But given that some seniors were retired in 2010, 2011, and 2016 — when there was famously no cost-of-living adjustment for Social Security benefits — a 3.2% increase is nothing to sneeze at.
The table below explores cost of living increases by year over the last six years.
| 2024 | 3.2% |
| 2023 | 8.7% |
| 2022 | 5.9% |
| 2021 | 1.3% |
| 2020 | 1.6% |
| 2019 | 2.8% |
Source: Social Security Administration
For most, Social Security benefits are not enough and should be part of a larger retirement plan. Use our retirement calculator to determine if you have enough money to retire without factoring in Social Security benefits.
Read More: How Much Do I Need to Retire?
How to Calculate Your Benefits Using the COLA Increase
To calculate your benefits using the estimated COLA increase for 2025, multiply your current benefit amount by 1.026. (As the estimated percentage changes, you can simply change the multiplier.)
For instance, if you earn 1,913, the average Social Security benefit for retired workers, multiply it by 1.026 to determine your new benefit:
$1,193 x 1.026 = $1,962
As we mentioned, Medicare Part B premiums may go up, which can alter your calculation. In years with smaller Social Security COLAs, Part B contributions can completely eradicate any increase in monthly benefits.
From Our CFP®
“When we get a COLA increase, we usually see a bump up in Medicare premiums. It’s not always a wash, but it definitely erodes the power of the COLA benefit. Some argue that the SSA should use a different Consumer Price Indicator, such as CPI-E, which considers common expenses for those aged 62 and up. It turns out that healthcare, housing, and prescription drugs weigh much heavier on the financial well-being of the aging retiree.
By: Christopher Hensley, RICP®, CES™
Financial Advisor
Social Security Payments FAQs
What will the Social Security increase be in 2025?
Reports currently predict that the cost-of-living adjustment to Social Security payments will be 2.66% in 2025. However, this number will not be finalized until October 2024. Once set, seniors will see a slight bump in their checks starting in January.
When is the Social Security COLA announced?
The 2025 Social Security COLA will be announced in October 2024. By October, the Social Security Administration can use Consumer Price Index data from July, August, and September 2024 to calculate the average cost-of-living increase and compare it to the same period in the previous year. The difference between the two numbers informs the Social Security COLA for the following year.
What is the historical average COLA increase?
From 1976 through 2023, the historical average COLA increase has been 3.79%. Beneficiaries got one of the largest increases in Social Security history in 2023 (8.7%), but even that historic increase pales in comparison to the largest ever: 14.3% in 1981. On the flip side, there have been three years where beneficiaries received no cost-of-living adjustments: 2010, 2011, and 2016.
How do I find out how much Social Security I get a month?
You can create an account on my Social Security to receive your Social Security Statement. If you’re already receiving Social Security benefits, this statement will outline your current earnings. If you haven’t yet retired and filed for Social Security, you can use this account and statement to predict your future Social Security benefits. Each December, eligible individuals should receive notification of their new monthly benefit amount in their my Social Security account.
What is the maximum Social Security benefit for 2024?
In 2024, individuals at full retirement age will recieve the maximum Social Security retirement benefit of $3,822 a month ($45,864 a year). Individuals who file for Social Security at 62 in 2024 will be eligible for a max benefit of $2,710 a month ($32,520), while individuals who retire at age 70 in 2023 will earn a max benefit of $4,873 a month ($58,476 a year).
Learn more: The Latest Social Security Statistics