More than 68 million Americans receive at least one type of Social Security benefit, as reported in June 2024 by the Social Security Administration (SSA).
This program and its various payments are essential for low-income citizens or retirees, who depend on these benefits to make ends meet and cover all their living expenses.
Faced with these scenarios, inflation seems to be a ghost that chases them from behind at a short distance, with the risk of catching up with them, or hanging over their heads like a sword of Damocles, which could hurt their finances at any moment.
Social Security Cost of Living Adjustment (COLA)
Year after year, the SSA applies a so-called cost-of-living adjustment (COLA), which means a calculation is made to determine how much inflation has impacted the Consumer Price Index for Urban Wage Earners and Clerical Workers. (CPI-W).
The basic steps to calculate the COLA are:
- The CPI-W of the third quarter of the previous year is compared with that of the third quarter of the current year.
- The percentage increase in CPI-W is calculated.
- This percentage increase is applied to Social Security benefits to determine the new amount.
To understand, the CPI-W showed an increase of 3.2% when the calculation was made at the end of 2023, so Social Security benefits would increase 3.2% in 2024.
The Social Security Administration (SSA) typically announces the COLA increase percentage in October of each year. This increase applies to benefits starting in January of the following year.
How Much Will the Social Security COLA Increase in 2025?
The downward trend in COLA projections for 2025 has raised concerns about retirees’ financial security. Despite these estimates, the official adjustment will not be announced until October, so there is still time for the numbers to change. However, current projections suggest that increases will be smaller compared to recent years, which could negatively impact many beneficiaries.
Each year, the SSA applies a cost-of-living adjustment (COLA) to benefits, with the goal of maintaining beneficiaries’ purchasing power in an environment of rising inflation. The non-partisan Senior Citizens League (TSCL) has projected the COLA for 2025 to be 2.57% based on August data. This figure is a downward revision from the previous prediction of 2.63% made in July.
The Historical Social Security COLA in Recent Years
Not every year the cost of living adjustments rise the same, since each year inflation is different and is a consequence and response to national and geopolitical events that impact the US economy.
According to SSA historical records, these are the COLA increases for the last 10 years:
- 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%
- 2004: 2.1%
Sources:
- SSA information on the COLA adjustment. https://www.ssa.gov/cola/
- Senior Citizens League Prediction, August 14, 2024: https://seniorsleague.org/press-brief-8-14-24-2025-cola-projection-is-2-57/
- US Bureau of Labor Statistics, most recent CPI-W summary: https://www.bls.gov/news.release/cpi.nr0.htm