Each year, Social Security benefits are adjusted for inflation through the Cost of Living Adjustment (COLA), ensuring recipients maintain their purchasing power despite rising costs.
For 2025, the COLA increase has been set at approximately 2.5%, providing a modest boost to retirees and other beneficiaries. Here’s what you need to know about this adjustment, its impact, and the updated payment schedule.
What Is the COLA?
The COLA is an annual adjustment made to Social Security and Supplemental Security Income (SSI) payments to reflect inflation. This increase ensures that beneficiaries can keep up with the rising cost of goods and services.
The COLA is determined by changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), calculated by the Bureau of Labor Statistics.
2025 COLA Highlights
The 2.5% increase in 2025 may not match the dramatic jump of recent years, such as the 8.7% adjustment in 2023, but it reflects a cooling inflation environment. This adjustment applies to:
- Social Security retirement benefits
- Disability benefits
- Supplemental Security Income (SSI)
Early Payment Schedule for 2025
In an unusual move, the first adjusted payment for January 2025 will be made early, on December 31, 2024, since January 1 is a holiday. This payment will reflect the 2025 COLA increase, giving beneficiaries an early financial boost.
| Payment Type | Payment Date | Includes COLA? |
|---|---|---|
| January SSI Payment | December 31, 2024 | Yes |
| Regular Social Security | January 2025 Dates | Yes |
Estimating Your COLA Increase
To estimate your new payment:
- Take your current benefit amount.
- Multiply it by 2.5% (0.025).
- Add the result to your current benefit.
For example:
- If your SSI payment is currently $943, the 2.5% increase adds approximately $23.58, bringing your total to $966.58.
How COLA Is Calculated
The Social Security Administration uses the CPI-W to determine the COLA. Here’s the process:
- Comparison Periods: The SSA compares the average CPI-W for the third quarter (July–September) of the current year to the same period in the last year where a COLA was applied.
- Percentage Change: If the CPI-W increases, the percentage change becomes the COLA, rounded to the nearest one-tenth of one percent.
Recent COLA Adjustments
Here’s a look at COLA adjustments over the past seven years:
| Year | COLA Percentage | Reason for Change |
|---|---|---|
| 2019 | 2.8% | Moderate inflation |
| 2020 | 1.6% | Minimal inflation |
| 2021 | 1.3% | One of the lowest adjustments in recent history |
| 2022 | 5.9% | Rising inflation impacting the cost of goods and services |
| 2023 | 8.7% | Historic increase to combat sharp inflation |
| 2024 | 3.2% | Moderating inflation |
| 2025 | 2.5% | Reflects a continued decline in inflation rates |
Why COLA Matters
Without COLA, retirees and others reliant on Social Security would see their purchasing power erode over time due to inflation. By adjusting payments annually, the SSA helps ensure beneficiaries can cover essential expenses, including food, housing, and healthcare.
Maximizing Your Benefits
To make the most of your Social Security benefits:
- Plan your retirement age carefully: Delaying retirement can increase your monthly benefit amount.
- Keep your information updated: Ensure the SSA has your correct banking details to avoid payment delays.
- Review your benefits statement: Check your estimated benefits online through your mySocialSecurity account.
