The cost of living adjustment (COLA) is a mechanism the Social Security Administration (SSA) uses to adjust Social Security benefits to counter inflation. This adjustment is calculated annually using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), and was created by law in 1975 to ensure that the purchasing power of beneficiaries is not affected by increases in prices.
Since its first application, the COLA has been an indispensable tool for Social Security benefits to continue maintaining their purchasing power. It is applied to payments for retirees, workers with disabilities or low-income seniors.
COLA in 2024: The Latest Adjustment and What’s Coming Next Year
In 2024, the COLA adjustment was 3.2%. This percentage, lower than the increase in the previous year (which was 8.7% in 2023), reflected inflation that was beginning to stabilize after the peaks observed in 2022. Although it was not a significant adjustment compared to years of high inflation, it is still relevant to protect beneficiaries’ income from increases in the cost of living.
Although the COLA increase is always announced in October, it is only applied as of January 1 following the announcement. Meanwhile, beneficiaries have a period of 3 months between the announcement and the application, and must buy food, medicine, and pay for their rentals with inflation that temporarily exceeds the benefits.
The Social Security COLA in Recent Years
The Social Security COLA increase has fluctuated in recent years, always as a consequence of preceding inflation. There have been years when the increase was 0%, while we have seen the 2023 peak of 8.7%.
- 2024: 3.2%
- 2023: 8.7%
- 2022: 5.9%
- 2021: 1.3%
- 2020: 1.6%
- 2019: 2.8%
- 2018: 2.0%
- 2017: 0.3%
- 2016: 0.0%
- 2015: 1.7%
- 2014: 1.5%
- 2013: 1.7%
- 2012: 3.6%
- 2011: 0.0%
- 2010: 0.0%
- 2009: 5.8%
- 2008: 2.3%
- 2007: 3.3%
- 2006: 4.1%
- 2005: 2.7%
What to Expect for 2025?
For next year, the Senior Citizens League (TSCL) has presented its new projection for the COLA adjustment, indicating that benefits will likely rise only 2.5%.
This estimate reflects a decrease in the consumer price index (CPI). In July, TSCL forecast an increase of 2.63%, but in August the prediction dropped to 2.57%. If this forecast comes true, beneficiaries would face the lowest COLA adjustment since 2021, when the increase was just 1.3%.If the 2.5% COLA is announced next month, the average monthly increase for beneficiaries would be $48, which would raise the average monthly payment to $1,920.