BIRMINGHAM, ALABAMA – Social Security beneficiaries may see a modest 2.6% cost-of-living adjustment (COLA) in 2025, an increase of about $45 per month for the average recipient. This projection, based on data from The Senior Citizens League, falls below the 3.2% increase in 2024 and is significantly lower than the record-breaking 8.7% bump in 2023. Despite this, it remains far from the lowest COLA amounts historically received by beneficiaries, according to Social Security administration figures.
The determination of COLAs, aimed at protecting benefits from inflation, relies on the Consumer Price Index for Urban Wage Earners and Clerical Workers, which tracks the average price of a set of goods. If the index shows no increase in the third quarter of the current year compared to the previous year, there will be no COLA adjustment. However, if there is an increase in the index, Social Security benefits will rise by the same percentage.
Lawmakers have expressed interest in altering how COLAs are calculated, seeking potential changes in the system. The implementation of annual COLAs began in 1975, providing beneficiaries with regular adjustments rather than requiring special acts of Congress for raises.
In recent history, the highest COLA increase occurred in 2022, with an 8.7% hike – the largest since 1981 when benefits surged by 11.2% due to inflation. On the contrary, three years – 2009, 2010, and 2015 – saw no COLA adjustments, with a minimal 0.3% increase in 2016. The announcement for Social Security’s 2025 COLA is expected in October, taking effect in January of the following year.
The fluctuating nature of COLA adjustments raises discussions among policymakers and beneficiaries on the adequacy of Social Security benefits in meeting the changing economic landscape. As individuals rely on these funds for essential expenses, variations in COLA rates can have significant implications for financial stability and well-being. The ongoing debate on COLA calculations underscores the importance of ensuring that Social Security remains a reliable source of income for retirees and individuals with disabilities.
Overall, the anticipated 2.6% COLA for 2025 reflects the complex interplay of economic factors affecting Social Security benefits, underscoring the need for continual evaluation and potential reforms to safeguard the financial security of beneficiaries.