Cost-of-living adjustments, known by their acronym COLA, are essential to maintain the quality of life of Social Security beneficiaries, both those who receive pensions and those who are covered by the Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI) programs.
Over the past decade, we have seen significant fluctuations in these adjustments, reflecting changes in the economy and inflation year after year. From 2014 to 2024, beneficiaries have experienced both years of modest increases and years of more substantial increases, ensuring that their retirement benefits remain a vital source of financial support.
How Are Social Security COLA Increments Calculated?
The idea of these increases is that the beneficiaries can continue to maintain their purchasing power to sustain the quality of life to which they are accustomed. It is done by the Social Security Administration (SSA) based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
This means that as the prices of goods and services increase, Social Security benefits are also adjusted to help beneficiaries maintain their purchasing power.
COLA Increases Between 2014 and 2024
Let’s see how these increases have changed in the last decade:
- 2014: 1.5%
- 2015: 1.7%
- 2016: 0.0% (no increase due to low inflation)
- 2017: 0.3%
- 2018: 2.0%
- 2019: 2.8%
- 2020: 1.6%
- 2021: 1.3%
- 2022: 5.9% (significant due to a considerable increase in inflation)
- 2023: 8.7% (one of the largest increases in decades)
- 2024: 3.2% (moderate after a year of high inflation)
To give a dimension to the impact of the increases, while in 2014 a Social Security retirement beneficiary received a maximum of $2,642, in 2024 that amount is $4,873. Between those years, the average COLA increase has been 2.5%, with the smallest increase being 0.0% in 2016 and the largest being 8.7% in 2023.
How much the COLA is expected to increase in 2025
According to the May inflation report from the U.S. Bureau of Labor Statistics (BLS), the estimates for the 2025 COLA increment are at or slightly above the average of the last two decades.
The non-partisan senior advocacy group Senior Citizens League (TSCL) slightly adjusted its forecast for the Social Security COLA in 2025, reducing it from 2.66% to 2.57% (to be rounded up to 2.6%) following the release of the May inflation report.
Maximum Social Security Benefits in 2024
In the year 2024, the maximum Social Security retirement benefit is $4,873 per month and is only awarded to those who decide to retire at age 70. This is because benefits increase by approximately 8% for each year that their receipt is postponed after reaching full retirement age.
To qualify for the maximum benefit, people must have earned the maximum taxable income from Social Security for 35 years, which in 2024 is $168,600. This amount is adjusted annually according to the national average wage index.
The maximum monthly Social Security Disability Insurance (SSDI) benefit for 2024 is $3,822, meanwhile the maximum for Supplemental Security Income (SSI) is $943 for en eligible individual, $1,415 for an individual with eligible spouse, and $472 for an essential person.