If you are receiving Social Security benefits, the good news is the Cost of Living Adjustment — COLA — will increase in 2025, meaning you will receive a few more dollars in your Social Security benefit.
The bad news is the increase is smaller than it has been in recent years.
For example, the COLA rate was 3.2 percent in 2024 and was 8.7 percent in 2023.
Here’s how much the COLA rate will increase in 2025.
What is the COLA rate for 2025?
According to the Social Security Administration, the Cost of Living Adjustment for 2025 will be set at 2.5 percent for Social Security benefits and SSI payments.
That means recipients will likely see an increase of roughly $50 per month.
When will I see the COLA increase?
You will receive the increased benefits during the last payment cycle of the year.
“Social Security benefits will increase by 2.5 percent beginning with the December 2024 benefits, which are payable in January 2025,” read the Social Security Administration’s COLA website. “Federal SSI payment levels will also increase by 2.5 percent effective for payments made for January 2025.”
How is COLA calculated?
COLA is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers from July through September of the last year as compared to the same three months of the current year. CPI-W tracks the overall inflation rate but can differ slightly.
Why hasn’t COLA kept up with inflation?
CPI-W isn’t an accurate reflection of what retirees spend most of their money on.
It measures inflation experienced by working adults younger than 62, instead of most retired adults, she said. Younger working consumers spend their money differently than older people covered by Medicare.
For example, economists estimate younger workers spend about 7% of their budget on health care costs, but research and surveys have indicated that older adults tend to spend 15% or more of their incomes on health care on average.
In addition, health care costs continue to rise faster than overall inflation. In the 12 months to September, medical care services rose 3.6% and hospital care services were up 4.5%, compared to 2.4% for overall inflation.
