How Social Security 2025 COLA Increase Compares to Previous Years

The 2025 cost of living adjustment for Social Security payments will be 2.5 percent, the Social Security Administration announced Thursday morning. Newsweek spoke with an expert about why seniors are upset and what they can expect financially in the upcoming year.

While the 2.5 percent increase will translate to roughly $50 more in seniors’ monthly payments, many are complaining that the boost doesn’t accurately reflect the inflation retirees are facing on everything from groceries to healthcare.

In recent years, seniors have become accustomed to larger COLAs due to high inflation rates in the aftermath of the pandemic. For 2024, the COLA was 3.4 percent, while 2023 saw Social Security payments increase by a whopping 8.7 percent.

The following reveals how the 2025 COLA compares to previous years, with each year listing the COLA decided in that year for the following year’s Social Security payments:

So, while the 2.5 percent COLA for 2025 might be far less than the most recent years’ increases, it actually measures higher than historic trends during many periods. Some years that saw limited if not any inflation resulted in COLAs of 0.0 percent, especially around the years of the Great Recession.

Still, for seniors who rely on their Social Security payments as their full retirement income, the COLA will do little to keep them afloat financially, experts say.

“When seniors hear that, it’s easy to get agitated because the immediate thought is ‘Well, the prices I’m seeing are still high,'” Alex Beene, a financial literacy instructor for the University of Tennessee at Martin told Newsweek.

“It’s not that prices are all of a sudden falling, but rather the rate with which they’re increasing is starting to stabilize.”

While this year’s cooling inflation is overall good news for the economy, prices on everyday items are likely to stay stubbornly higher than they were just a few years ago, Beene said.

Kevin Thompson, a finance expert and the founder and CEO of 9i Capital Group, said the criticism surrounding next year’s COLA is valid, as shelter and medical costs have risen by 4.9 and 3.6 percent. Those prices make up the bulk of what impacts retirees’ fixed-income needs, he said.

“The pushback is justified because these prices aren’t expected to drop, only rise at a slower rate,” Thompson told Newsweek. “When people hear ‘inflation is slowing,’ they know it means prices are still rising, just less rapidly.”

Many have suggested that the entire way the COLA is calculated should change to better align with the actual prices seniors are facing in their day-to-day lives.

“This year’s COLA is the lowest in recent years, reflecting the cooling inflation following the significant post-pandemic surge,” Thompson said. “I believe the Social Security COLA should be adjusted to reflect the costs that most impact retirees, such as shelter and healthcare. This would provide a more meaningful increase to help offset the true financial challenges retirees face.”