The Social Security Administration (SSA) is due to announce the annual Cost of Living Adjustment (COLA) increase for 2025.
Social Security benefit recipients across the country will today find out how much their payments will rise in 2025. The COLA is designed to keep payments in line with inflation, so that purchasing power is not eroded over time.
The first adjusted payments will be made in December 2024 for those who collect Supplemental Security Income (SSI) and in January 2025 for people who just get Social Security.
A file photo of dollars, a Social Security card and Treasury Department checks. The COLA update will be announced on October 10.
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What Time Will the COLA Be Announced?
The Bureau of Labor Statistics will provide an update on the CPI at 8:30 a.m. ET on Oct. 10. It is then expected that the SSA will make an announcement in tandem or shortly after this time.
How Much Will the COLA Be?
In 2024, Social Security benefits increased by 3.2 percent. In 2023, a historic rise of 8.7 percent was granted to retirees and other benefit claimants due to high inflation following the coronavirus pandemic.
Retirees are very unlikely to get a boost near those levels this year. Experts have predicted an annual rise of around 2.5 percent.
On this basis, independent Social Security and Medicare policy analyst Mary Johnson said a benefit recipient receiving $1,870 per month from the Social Security Administration (SSA) could see their monthly payment rise by about $46.80 next year.
“The 2025 COLA will be the lowest received by Social Security beneficiaries since 2021, at the same time inflated prices persist on key essentials such as housing, meats, auto insurance, any type of service and repairs,” Johnson said in a statement to Newsweek. “Despite it being the lowest COLA since 2021, a 2.5 percent COLA would be considered about average.”
Krisstin Petersmarck, the founder and CEO of New Horizon Retirement Solutions, told Newsweek she agrees with the 2.5 percent figure. “This seems to align with the Fed’s recent reduction of interest rates by 50 basis points and the 20-year average COLA adjustment of 2.6 percent,” she said.
How Is the COLA Calculated?
The COLA is determined based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which monitors the spending habits of working Americans. Every fiscal quarter, the Bureau of Labor Statistics carries out a survey to evaluate the spending patterns of U.S. citizens, examining price variations for around 80,000 goods.
Each year, the COLA is based on the average CPI-W in the third quarter of the current year and the average in the same period of the previous year. If there’s an increase, that percentage is rounded to the nearest 10th of 1 percent, which determines the annual increase.
