Social Security's 2025 COLA: Here's What We Know So Far

At this point, many consumers are beyond frustrated with what economists are calling sticky inflation. Workers and retirees alike have been grappling with higher living costs since 2021. And while we’re not seeing the same runaway inflation now as we did in 2022, many people are still feeling the strain at the supermarket, drugstore, and pump.

In 2023, seniors on Social Security got a massive 8.7% cost-of-living adjustment, or COLA, following a period of truly rampant inflation. At the start of 2024, however, benefits only rose 3.2% — a generous COLA in the context of the past 20 years, but nowhere close to 8.7%.

Social Security cards.

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Next year’s Social Security COLA, meanwhile, is shaping up to be even smaller than 2024’s. And while that’s bad news for seniors in one regard, there’s a big silver lining.

Smaller COLAs mean cooling inflation

Social Security COLAs are pegged to inflation — specifically, data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The nonpartisan Senior Citizens League recently put out an estimate stating that the group expects a 2.6% Social Security COLA for 2025 based on recent inflation data . For context, in March, the CPI-W was up 3.5% annually.

Given that many seniors were disappointed in their 2024 COLA, a 2.6% COLA in 2025 is unlikely to sit well. But it’s important to recognize that a smaller COLA is an indication of easing inflation. And that could have a truly positive impact on seniors.

A 2.6% COLA applied to a $2,000 monthly Social Security benefit results in an additional $52 a month, assuming part of that sum isn’t eaten up by Medicare Part B premium hikes. But cooling inflation could lead to $52 in monthly savings on things like groceries, gas, utilities, and other common expenses. So all told, seniors might fare reasonably well financially with a raise at that level.

It’s too soon to know for sure

Social Security COLAs are calculated based on third quarter data from the CPI-W and are announced in October each year. As such, the above 2.6% projection is really just that — an estimate.

It’s too soon to know what next year’s COLA will look like. And while there’s a chance it’ll come in at less than 2.6%, it could also end up being similar to this year’s COLA if inflation continues to creep upward.

Either way, it’s a good idea for seniors to try to avoid being COLA-dependent. To that end, those with the ability to do so should consider trying to boost their income by joining the gig economy. There are numerous flexible job opportunities out there, and the extra money could buy a lot of people more financial wiggle room.

Of course, for those who aren’t yet retired, boosting savings is a great way to end up in a situation where Social Security COLAs don’t matter quite so much. It may be too late for current beneficiaries to boost their nest eggs, but those who are still collecting a paycheck can pad their savings to become less reliant on Social Security in retirement on a whole. Given the potential for benefit cuts down the line, that’s a prudent thing to do regardless of how COLAs shake out in the coming years.

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