Social Security beneficiaries will see a lower cost-of-living adjustment (COLA) for 2025, as the Social Security Administration (SSA) released this morning a finalized adjustment of 2.5% following cooled inflation in the third quarter of 2024.
Next COLA Update: Initial 2026 Social Security COLA Prediction: 2.5%
Previous COLA Update: 2025 Social Security COLA Falls Once Again
All COLA Updates: Social Security Cost of Living Adjustment (COLA)
On average, Social Security retirement benefits for 72.5 million Americans will increase by about $50 per month starting in January.
“Social Security benefits and SSI payments will increase in 2025, helping tens of millions of people keep up with expenses even as inflation has started to cool,” said Martin O’Malley, commissioner of Social Security.
Nearly 68 million Social Security beneficiaries will see a 2.5% COLA beginning in January 2025. Increased payments to nearly 7.5 million people receiving Supplemental Security Income (SSI) will begin on December 31, 2024.
Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) is slated to increase to $176,100 from $168,600.
The news follows the latest CPI-W numbers from the Bureau of Labor Statistics (BLS) this morning at 2.2%, after hovering near or above 3% for most of the year.
Retirees pessimistic amid higher living costs
This year’s COLA is smaller than in recent years, compared to 2024’s moderate 3.2% and 2022’s high of 8.7%. Over the last decade, the Social Security COLA has averaged at about 2.6%.
Americans say they’re experiencing the effects of the dwindling adjustment. A report from the AARP found that only 16% of Americans ages 50 and over agree that “a cost-of-living adjustment of less than 3% for Social Security recipients is enough to keep up with rising prices.”
“Inflation took a financial toll this past year, particularly on retirees, who often rely on Social Security as a key source of income,” said AARP’s CEO Jo Ann Jenkins, in a statement. “Even with this adjustment, we know many older Americans who rely on Social Security may find it hard to pay their bills. Social Security is the primary source of income for 40% of older Americans.”
Independent Social Security and Medicare policy analyst Mary Johnson, who releases her own COLA predictions and analyses each month, reiterated the frustrated sentiment among retirees. Johnson, who is also retired, says the new adjustment is barely enough for retirees to buy a few days’ worth of groceries. “With average retiree benefits rising by about $48 per month, that’s only going to buy about 14 gallons of gasoline per month at today’s prices, or maybe enough groceries for one to last two or three days,” said Johnson.
Shannon Benton, executive director with The Senior Citizens League (TSCL), added that the adjustment hasn’t kept pace with real increases in day-to-day living costs, leaving retirees calling on policymakers for change while struggling to maintain a standard of living. A recent TSCL survey of more than 3,000 older Americans found that 72% said that changing the COLA calculation to an index that better reflects seniors’ changing costs should be a top priority for Congress. Additionally, 70% said they worry that persistently high inflation prices will cause them to raise their spending and risk depleting their retirement savings and other assets.
“Our research shows that 67 percent of seniors depend on Social Security for more than half their income and that 62 percent worry their retirement income won’t even cover essentials like groceries and medical bills,” said Benton. “Seniors are frustrated that the CPI-W fails to measure inflation as they experience it.”