Cola Increase 2025: The Social Security Administration (SSA) has officially set the 2025 cost-of-living adjustment (COLA) at 2.5%, the smallest increase since 2021. While inflation has cooled compared to the pandemic years, this modest bump in Social Security benefits has sparked concerns among retirees, who worry about keeping pace with rising living costs.

For 2025, the 2.5% COLA increase will add an average of $50 to monthly Social Security checks, impacting roughly 68 million recipients. The average Social Security payment for retirees will increase from $1,927 to $1,976 starting January 2025. For married couples who both receive benefits, the average monthly amount will rise to $3,089 from the current $3,014. Additionally, 7.5 million people receiving Supplemental Security Income (SSI) will see their increased payments starting December 31, 2024. (Cola Increase 2025)

Understand the 2025 COLA Calculation

The annual COLA is determined by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which tracks price changes in goods and services from July to September. The 2025 adjustment reflects easing inflation, which hit a 40-year high in June 2022 but has since declined.

However, some senior advocacy groups argue that the COLA doesn’t accurately reflect the higher costs retirees face, particularly in healthcare. Bill Sweeney, Senior Vice President of Government Affairs at AARP, expressed concern that many seniors may find the 2.5% increase insufficient to cover rising expenses.

Impact on Social Security Payments

Here’s how the 2025 COLA increase will impact Social Security benefits:

• Average payment for retirees: Rises from $1,927 to $1,976 per month.
• Married couples receiving benefits: Will see an increase from $3,014 to $3,089 per month.
• SSI recipients: Around 7.5 million people will see their increased benefits on December 31, 2024.

The 2025 COLA also impacts other programs, including Social Security Disability Insurance (SSDI), Medicare, and the Supplemental Nutrition Assistance Program (SNAP).

A Shift from Recent High COLA Increases

In recent years, Social Security beneficiaries enjoyed historically high COLA increases due to surging inflation. The 2023 COLA stood at 8.7%, the highest adjustment since the early 1980s, while 2022 saw a 5.9% hike. For 2024, the adjustment was 3.2%, and now, with inflation stabilizing, the 2.5% COLA for 2025 represents a return to the historical average of around 2.6%.

Why Seniors Feel the Squeeze

Despite inflation being under control, many retirees feel that Social Security’s current COLA calculation doesn’t adequately reflect their cost of living, particularly healthcare expenses, which tend to rise more sharply for older adults. Advocacy groups like Social Security Works have called for reforming the COLA calculation to use a different metric, the Consumer Price Index for Elderly Consumers (CPI-E), which would more accurately reflect the spending habits of those aged 62 and older.

Sherri Myers, an 82-year-old retiree from Pensacola, Florida, expressed her frustration, noting that the COLA increase “won’t make a dent” in her daily expenses. Like many retirees, Myers has had to seek work to supplement her income as inflation has eroded her savings.

Silver Lining: Inflation is Under Control

Though the 2.5% COLA may seem small compared to previous years, it is a sign that inflation is stabilizing. “We got a good message mixed in with the bad,” said Kelly LaVigne, Vice President of Consumer Insights at Allianz Life. “The reason the COLA is so low is because inflation is under control.”

Looking ahead, future COLA adjustments could remain modest if inflation stays near the Federal Reserve’s 2% target. However, seniors and advocates continue to push for changes that ensure Social Security benefits truly keep pace with their financial needs.

Takeaways for Social Security Recipients

• The 2025 COLA is set at 2.5%, adding an average of $50 to monthly benefits starting in January.
• Around 68 million Americans will be impacted by the increase, along with 7.5 million SSI recipients.
• Despite cooling inflation, many retirees feel the increase may not be enough to cover rising healthcare and daily living expenses.

As the cost-of-living adjustments settle into more typical patterns, beneficiaries hope for reforms that better reflect their financial realities, particularly with the rising cost of healthcare.