Every year, the Cost of Living Adjustment or COLA makes sure that Social Security and Supplemental Security Income, SSI recipients have their payments adjusted for inflation.
The 2025 COLA increase, approximated at around 2.5%, is expected to arrive just in time to help keep some cash flowing for retirees and other recipients. Learn more about how the COLA is calculated and why it matters for recipients.
What Is COLA?
An annual adjustment to Social Security benefits, the COLA helps keep pace with inflation to ensure that recipients’ purchasing power is preserved.
COLA indexing payments help retirees and other beneficiaries continue to cover the different elements of their living costs-food, housing, medical expenses, and more.
This adjustment isn’t limited to Social Security retirement payments. In fact, it applies across a range of federal benefits-SSI, for example-that serve as an important safety net for millions of Americans.
Highlights of the 2025 COLA
A few updates are notable in the 2025 COLA, including:
- Percentage Increase: 2.5%, a moderate inflation rate.
- Applies To: Social Security benefits, SSI payment, and other federal programs
- Early Payments: A few categories, like SSI beneficiaries, will get their first adjusted payment as early as December 31, 2024
This modest increase adheres to the trend that adjustments are in step with inflation, which hit record highs in 2022 and 2023.
Key Dates for January 2025 Payments
The first 2025 payment schedule includes the COLA increase. Here’s what beneficiaries can expect to see:
- SSI Payment: Because January 1, 2025 falls on a holiday, the Social Security Administration will make SSI payments on December 31, 2024. This will include the 2025 COLA adjustment.
- Other Social Security Benefits: Scheduled payments remain on their normal date based on recipients’ birth dates.
| Date | Benefit |
|---|---|
| December 31, 2024 | SSI Payment with 2025 COLA |
| January 3, 2025 | Regular Social Security Payments |
Impact of the 2025 COLA on Benefits
The maximum benefit for SSI recipients in 2024 will be $943, increased by 2.5%, adding $23.58 to their monthly income. Social Security beneficiaries also see a proportionate rise in their payments commensurate with what they are receiving now.
| Year | COLA Percentage | Reason |
|---|---|---|
| 2019 | 2.8% | Moderate inflation |
| 2020 | 1.6% | Low inflation |
| 2021 | 1.3% | Minimal cost-of-living changes |
| 2022 | 5.9% | Inflation surge |
| 2023 | 8.7% | Historic inflation spike |
| 2024 | 3.2% | Cooling inflation |
| 2025 | 2.5% | Sustaining purchasing power amidst lower inflation |
How COLA Is Determined
The Social Security Administration calculates COLA using the Consumer Price Index for Urban Wage Earners and Clerical Workers, which reflects price changes in those goods and services regularly purchased by urban workers.
Steps in the COLA Calculation
- Steps Inflation Compare: average CPI-W for the third quarter of the current year with the same period in the last year a COLA was determined. Calculate the Percentage: In the event that the CPI-W increased, this percent change is rounded to the nearest tenth of a percent.
- Apply Adjustment: The calculated percent is added onto benefit payments starting in December, and then appearing in the checks in January.
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Why COLA Matters
The COLA increase for 2025 helps retirees maintain the purchase power of their benefits with regard to grocery stores, housing, and healthcare costs. In fact, these changes are lifelines for most people, especially during tough economic times.
FAQs:
What is the 2025 COLA?
2025 COLA is the annual Social Security benefits increase to match inflation rates.
What are the expected impacts of the 2025 COLA on Social Security benefits?
It will lead to a percentage increase in monthly benefits to the recipients to offset increasing living expenses.
Who is eligible for the 2025 COLA?
All classes of Social Security recipients, including retiree, disability recipients and survivors.
How is the rate of the COLA established?
It is established based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).