More and more information is being added to the pile of statistics and data the Social Security Administration (SSA) needs to determine how much to increase Social Security benefits, including Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI). , for the year 2025.
Most American retirees depend on Social Security checks or deposits to make ends meet with all their living expenses covered, while one of their main enemies is inflation.
Broadly speaking, inflation is an economic phenomenon that occurs due to the generalized and sustained increase in the prices of goods and services in an economy over a certain time. One of the consequences is the loss of purchasing power, as prices rise and money is worth less, so people can buy less and less with their income.
In 2024, for example, the average Social Security benefit for retired workers was $1,916.63 in May 2024. Although we already know that in most large cities and states with higher costs of living, that number is not enough to reach at the end of the month. According to figures from a Gallup poll, only 11% of retirees do not depend on Social Security income to cover their expenses, and in 2022 the Social Security administration, through all its benefit programs, will withdraw 22.7 million of people living in poverty, of whom 16.5 million were adults aged 65 or older.
A Brief Explanation of What the Social Security COLA Is and How It Helps Increase Your Benefits
As we already said, fleeing inflation is a concern that afflicts all Americans and not just retirees. The problem is that sometimes inflation is faster than us and usually catches up with us from time to time. In the case of retirees and Social Security beneficiaries, there is the “Cost of Living Adjustment” (COLA), an indicator that aims to help beneficiaries maintain their purchasing power in the face of rising prices.
The COLA increase is based on the variation of the Consumer Price Index for Urban and Clerical Workers (CPI-W) for the third quarter of a year and is compared to the same period of the previous year. If the averaged percentage shows an increase, this will translate into an increase in profits. If it is concluded that there is no increase in the average CPI-W of the aforementioned periods, then the benefits will remain the same for one more year.
Let’s Look at the Historical COLAs of Social Security
The Cost of Living Adjustment (COLA) began to apply to Social Security benefits in 1975. Before this, increases in Social Security benefits required specific legislation from Congress. The automatic implementation of the COLA was designed to ensure that Social Security benefits maintained their purchasing power in the face of inflation, without the need for ongoing legislative intervention.
Here is the list of COLA percentages from 2000 to 2024:
- 2000: 3.5%
- 2001: 2.6%
- 2002: 1.4%
- 2003: 2.1%
- 2004: 2.7%
- 2005: 4.1%
- 2006: 3.3%
- 2007: 2.3%
- 2008: 5.8%
- 2009: 0.0% (no increase due to low inflation)
- 2010: 0.0% (no increase due to low inflation)
- 2011: 3.6%
- 2012: 1.7%
- 2013: 1.5%
- 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%
- 2023: 8.7%
- 2024: 3.2%
COLA Versus Inflation by 2025 — How Much Will Social Security Benefits Rise?
Nonpartisan senior advocacy organization The Senior Citizens League (TSCL) responded to the moderation in core inflation by slightly increasing its 2025 COLA forecast to 2.63% (which would be rounded to 2.6%) from 2.57%, after the May inflation report. This prediction would put the 2025 COLA right on par with the two-decade average.
Separately, independent Social Security and Medicare policy analyst Mary Johnson, who recently retired from TSCL, lowered her 2025 cost-of-living adjustment forecast to 2.7% from the 3% she expected after the release from the May inflation report by the Bureau of Labor Statistics (BLS).
