As we approach October, beneficiaries of Social Security are eagerly awaiting the official 2025 Cost of Living Adjustment (COLA) announcement. The prediction, however, is lower than many retirees might have expected.
Mary Johnson, a well-known independent policy analyst for Social Security and Medicare, has revised her projection, estimating a COLA of 2.5 percent for 2025. This is a slight decrease from her earlier projection of 2.57 percent in August.
This adjustment may sound small, but it has a noticeable impact on those relying on Social Security benefits. For example, a beneficiary receiving $1,900 a month from the Social Security Administration (SSA) would see an increase of approximately $46.80 in 2025.
Impact
Although 2.5 percent is close to the historical average for COLA, it’s the smallest increase since 2021. At the same time, the cost of living continues to rise, driven by inflation in housing, groceries, and essential services like auto insurance. As a result, retirees who depend on Social Security payments for their monthly expenses may find the upcoming increase inadequate to cover these higher costs.
The official announcement regarding the COLA will be made on October 10, after the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) data from the third quarter is finalized. COLA is closely tied to inflation, which the CPI-W measures by tracking the cost of goods and services used by working Americans.
Calculated
COLA is calculated based on changes in the CPI-W from one year to the next. Specifically, the average CPI-W for the third quarter (July through September) of the current year is compared to the same quarter of the previous year. If inflation has increased, the percentage increase is rounded to the nearest tenth and applied to Social Security benefits.
In 2024, beneficiaries will receive a 3.4 percent increase, reflecting last year’s inflation. This follows an unusually high increase of 8.7 percent in 2023, largely due to the economic fallout of the COVID-19 pandemic. Occasionally, however, no COLA increase occurs, as was the case in 2016 when inflation stagnated between 2014 and 2015.
Once the percentage increase is confirmed, it is applied to benefits for retirees, survivors, those receiving Social Security Disability Insurance (SSDI), and those on Supplemental Security Income (SSI).
Beneficiaries
Even though the exact COLA percentage is not final, it’s worth looking at how this 2.5 percent increase would affect beneficiaries if it holds. Below is a breakdown of what Social Security checks would look like across various benefit categories:
| Benefit Type | Average Check | 2.5% COLA Prediction |
|---|---|---|
| Retirement | ||
| On average | $1,900 | $1,948 |
| Age 62 | $2,710 | $2,778 |
| Age 67 | $3,822 | $3,918 |
| Age 70 | $4,873 | $4,995 |
| Survivor | ||
| On average | $1,505 | $1,543 |
| Individual | $1,773 | $1,817 |
| 2 Children | $3,653 | $3,744 |
| Disability | ||
| On average | $1,537 | $1,575 |
| Blind recipients | $2,590 | $2,655 |
| Maximum payment | $3,822 | $3,918 |
| SSI | ||
| On average | $698 | $715 |
| Individuals | $943 | $967 |
| Couples | $1,415 | $1,450 |
| Essential person | $472 | $484 |
These figures give a general sense of what beneficiaries can expect with a 2.5 percent COLA increase. However, keep in mind that this is only a projection. The final COLA figure, which will be confirmed in October, could be slightly higher or lower.
Chances
Interestingly, Johnson has also projected that there’s about a 17 percent chance that the COLA could exceed 2.5 percent and a 13 percent chance that it could fall below this level. While these numbers are not guaranteed, they provide a glimpse into the unpredictability of economic factors and their effect on Social Security benefits.
Beneficiaries should note that even after the official COLA is announced, only those receiving SSI will see their checks increase in December 2024. For all others, the new payments will start arriving in January 2025.
No matter what the final percentage turns out to be, the COLA for 2025 will help provide a modest increase in benefits. Yet, for many, this may not be enough to keep up with rising living costs, highlighting the ongoing financial challenges for retirees and those on fixed incomes.
FAQs
When will the official 2025 COLA be announced?
It will be announced on October 10, 2024.
How is the COLA calculated?
It’s based on CPI-W data from July to September each year.
How much will the COLA increase in 2025?
It is predicted to be 2.5 percent.
Will everyone get a COLA increase?
Yes, all Social Security beneficiaries will see an increase.
When will the new payments start?
New checks will arrive in January 2025, except for SSI, which begins in December.
