More than 70 million Social Security recipients in the U.S. may need to lower their expectations for the 2025 cost-of-living adjustment (COLA). According to projections released on Wednesday, retirees could see an average monthly increase of $48, or about 2.5%, in their benefits. This adjustment, which is based on the inflation rate, is slightly below last month’s projected 2.57% calculation, according to the Senior Citizens League (TSCL), an advocacy group for older Americans.
The latest forecast came shortly after the government reported that prices rose by 2.5% in the 12 months ending in August, indicating that inflation is continuing to cool down. However, the 2.5% increase remains a projection, as the official COLA won’t be determined until mid-October when the Social Security Administration (SSA) announces its decision. If the forecast holds, this would bring the average monthly Social Security benefit to $1,968, starting with January 2025 checks.
While a 2.5% increase may seem modest compared to the 3.2% rise seen in 2024, it aligns with the historical norm for COLA adjustments, which have averaged around 2.6% over the past two decades. In some years, COLA has been as low as 0.0%, such as in 2010, 2011, and 2016, while the largest recent increase came in 2023 at 8.7%, driven by post-pandemic inflationary pressures.
The SSA determines the COLA for the upcoming year based on inflation data from the third quarter, spanning from July through September. Specifically, it uses the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which tracks spending by urban wage earners and clerical workers. If the CPI-W shows a higher inflation rate in the current quarter compared to the same period the previous year, the COLA is adjusted upward accordingly.
Shannon Benton, the executive director of TSCL, emphasized the importance of ensuring Social Security benefits keep up with inflation. “Ensuring that seniors have enough to feed and house themselves with dignity is a major reason why we advocate for a minimum COLA of 3%,” Benton said in a statement. This sentiment is especially crucial, given that approximately two-thirds of seniors rely on Social Security for more than half of their monthly income, and 28% depend on it entirely, according to TSCL research.
While the 2025 COLA may not be as generous as some recent increases, it remains an important factor in helping seniors keep pace with rising costs of living. Inflation has moderated over the past year, easing some of the economic pressures faced by retirees, but many seniors continue to struggle with rising healthcare costs, housing expenses, and everyday essentials like food and utilities.
A lower-than-expected COLA could also reignite debates about the adequacy of Social Security benefits and the formula used to calculate the annual adjustments. Some advocates argue that the current CPI-W measure does not accurately reflect the spending patterns of seniors, who tend to spend more on healthcare and housing than the younger working population tracked by the index. They propose using a different inflation measure, such as the Consumer Price Index for the Elderly (CPI-E), which more closely aligns with the spending habits of older Americans.
The 2025 COLA increase may also come under scrutiny from lawmakers and policymakers as the broader debate over the future of Social Security continues. The program’s long-term solvency remains a pressing concern, with the Social Security Trust Fund projected to become depleted by 2034 unless significant changes are made. While a depletion of the trust fund would not mean the end of Social Security payments, it would likely result in reduced benefits, which could disproportionately impact those who rely on the program as their primary source of income.
Various proposals have been floated to address Social Security’s funding shortfall, including raising the retirement age, increasing payroll taxes, or reducing benefits for higher-income retirees. However, these proposals are often politically divisive, and reaching a consensus on how to ensure the program’s sustainability has proven difficult.
For now, the focus remains on the 2025 COLA and how it will impact the millions of Americans who depend on Social Security to cover their basic living expenses. While a 2.5% increase may not be as large as some might have hoped, it represents a continued effort to ensure that benefits keep up with inflation and provide some measure of relief to seniors in an uncertain economic environment.
Ultimately, the 2025 COLA is part of a broader conversation about how to best support America’s aging population and ensure that Social Security remains a reliable and sustainable safety net for future generations. With inflation continuing to evolve and economic conditions changing, the need for thoughtful policy discussions and reforms to strengthen the program has never been more pressing.
In the meantime, Social Security recipients will be watching closely in mid-October when the SSA makes its official announcement regarding the 2025 COLA. Whether the increase ends up being 2.5% or slightly higher, it will have a direct impact on the financial well-being of millions of retirees and other beneficiaries who rely on these monthly payments to make ends meet.
As the nation’s population continues to age, the importance of Social Security as a cornerstone of retirement security will only grow. Policymakers, advocates, and recipients alike will need to continue working together to ensure that the program remains strong, equitable, and capable of meeting the needs of those it was designed to serve. For now, the projected 2.5% increase provides a glimpse into the future of Social Security in a post-pandemic world, where inflation is beginning to stabilize, but financial uncertainty still looms large for many Americans.
