Social Security COLA: Here's how much retirees will get in 2025

(NewsNation) — Social Security recipients will receive a 2.5% cost-of-living adjustment in 2025, the Social Security Administration announced Thursday.

The 2025 COLA bump is the smallest cost of living increase since 2021 and lower than last year’s 3.2% benefit boost. Analysts had predicted the COLA would be 2.5% in 2025.

On average, Social Security retirement benefits will increase by about $50 per month starting in January.

What does the Social Security COLA bump mean?

The modest bump represents a mix of good and bad news for the roughly 70 million Americans who receive a monthly Social Security benefit. On the one hand, the 2025 increase is significantly lower than the 8.7% COLA boost in 2023 — meaning retirees struggling to make ends meet won’t see much relief.

Then again, a lower COLA means inflation is moderating and that’s good news for Americans whose finances have been stretched thin by rising prices at the grocery store, gas pump and doctor’s office.

After surging to 9.1% in June 2022, annual inflation has gradually eased, dropping to 2.4% year-over-year in September.

You can use the NewsNation Social Security calculator to estimate your monthly benefit. Calculate your benefits here.

How is Social Security COLA determined?

Each year the government determines the COLA by comparing the average inflation rate from July to September to the same period the year before. That calculation is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

Some senior advocacy groups want the government to determine the COLA based on the CPI-E, a different inflation index specifically for seniors, arguing it would more accurately reflect the spending patterns of those 62 and older.

The vast majority of Social Security beneficiaries, roughly 75%, are retired workers who received an average monthly check of $1,920 as of August. That’s about $80 more than the year prior.

Social security shortfall

Thursday’s COLA announcement comes as the national social insurance plan faces a looming financial shortfall. In roughly a decade, Social Security recipients could see their benefits cut by 21% if Congress doesn’t take action.

Vice President Kamala Harris and former President Donald Trump have vowed to protect the program and promised not to slash benefits, though neither has offered many specifics.

The 2025 COLA increase will be reflected in your January Social Security check.