Don’t expect a substantial cost of living amount (COLA) increase in your Social Security checks in 2025. The latest estimates put the COLA at 2.6%, according to the non-profit Senior Citizens League, down from 2.7% in July and 3.2% last year. The drop reflects the easing of inflationary pressures.
Unfortunately, good inflation news is bad news for the COLA. The easing inflation rate means retirees will get a smaller increase. While a lower inflation rate should lead to a smaller increase in prices, it does nothing to lower current prices for groceries, utilities or housing that many are struggling to meet.
Changes to the COLA are based on the CPI-W, which is a measure of price changes for a selection of goods and services, including food, energy and medical care, that is reported monthly by the federal Bureau of Labor Statistics. It is a subset of the Consumer Price Index (CPI.)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The Social Security Administration (SSA) published wage base projections for 2025 through 2033 in the 2024 Social Security and Medicare Trustees Report. The May 2024 projections estimated an increase in 2025 to $174,900 on the low end and $175,500 on the high end. The wage base is the maximum amount of earnings subject to Social Security tax and was $168,600 in 2023.
How is the COLA amount determined?
The COLA is determined by the inflation observed in July, August, and September in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). These months are crucial for setting the Social Security benefit increase for the upcoming year. The SSA calculates the percent change between average prices in the third quarter of the current year with the third quarter of the previous year. Until then, it is possible, if not likely, that the projected amount could go up or down based on final inflation numbers for those months.
Recent proposals to change the CPI used to formulate the COLA and better reflect the costs paid by senior citizens has so far failed. The change is meant to put more in seniors wallets and put them in a better position to meet the expenses typical of a person 65 and over. Proposals call for the COLA to be based on the Consumer Price Index for Americans aged 62 or older (CPI-E), as this price index reflects the costs incurred by older adults more accurately. Medical expenses, an increasing burden on older adults, are weighted more heavily in the CPI-E than in the CPI-W, the current measure used to determine the annual COLA.
Projected COLA for 2025
The projected COLA for 2025 is 2.57%. The projection is based on the July CPI numbers, which is the first of three sets of numbers the SSA will use to determine the 2025 COLA.
The COLA for 2025 will be reflected in Social Security checks starting in January of that year. This happens every year, although the payment may occasionally arrive a few days early due to holidays or weekends.
Ultimately, we will have to wait until October to find out what the final COLA for 2025 will be.
Recent COLAs
Prior to 1975, Social Security benefit increases were set by legislation. From 1975-82 COLAs were effective with Social Security benefits payable for June in each of those years. The first COLA, for June 1975, was 8%.
The highest COLAs have been when inflation was at its highest. For 1979 the rate was 9.9%, in 1980 it was 14.3% and in 1981 it was 11.2%. The COLA in 1982 dropped to 7.2% as the economy improved and inflation was on the decline. In 2009 and 2010 the COLA was 0%. The COLA spiked again in 2021 and 2022 during the rampant inflation triggered by the pandemic and was 5.9% and 8.7% respectively. The COLA fell considerably last year to 3.2%.
| Year | COLA | Row 0 - Cell 2 |
| 2013 | 1.5% | Row 1 - Cell 2 |
| 2014 | 1.7% | Row 2 - Cell 2 |
| 2015 | 0.0% | Row 3 - Cell 2 |
| 2016 | 0.3% | Row 4 - Cell 2 |
| 2017 | 2.0% | Row 5 - Cell 2 |
| 2018 | 2.8% | Row 6 - Cell 2 |
| 2019 | 1.6% | Row 7 - Cell 2 |
| 2020 | 1.3% | Row 8 - Cell 2 |
| 2021 | 5.9% | Row 9 - Cell 2 |
| 2022 | 8.7% | Row 10 - Cell 2 |
| 2023 | 3.2% | Row 11 - Cell 2 |
Related Content
- Three Changes Coming for Social Security in 2025
- Social Security Payment Schedule for 2025
- Proposed Change in Social Security Could Mean More Money for Retirees
- Almost 40% of Seniors Are Going Back to Work Due to Low COLA. Are You?
- July CPI Report Supports September Easing: What the Experts Are Saying About Inflation
-
USPS Is Raising Prices for Holiday Shipping: Dates and Increases You Need to KnowWhat the USPS's $16 price hike means for your wallet and your small business.
-
July CPI Report Ignites a Risk-On Rally: Stock Market TodayMarket participants price out worst-case scenarios for tariffs and inflation and will now turn their attention to employment and growth.
-
USPS Is Raising Prices for Holiday Shipping: Dates and Increases You Need to Know
What the USPS's $16 price hike means for your wallet and your small business.
-
Don't Be a '98 Pound Weakling' Just Because You're AgingCharles Atlas's tips to the '98-pound weakling' might be the only comic book ads that actually paid off. Swap the X-ray glasses for this healthy habit.
-
For Savers Who Hate Surprises, This Strategy DeliversThis approach gives you peace of mind, regardless of whether rate cuts happen.
-
Are You Supporting Multiple Generations in Retirement?Here’s how to support your parents and your adult children without sacrificing your retirement.
-
Should You Buy a Second Home When You Retire?Buying a second home in retirement, especially with sufficient savings, can enhance your lifestyle or serve as a smart investment. But it requires careful planning.
-
What the OBBB Means for Social Security Taxes and Your Retirement: A Wealth Adviser's GuideFor Americans in lower- and middle-income tax brackets, the enhanced deduction for older people reduces taxable income, shielding most of their Social Security benefits from being taxed.
-
Financial Planner vs Investment Manager: Who's the Better Value for You?When markets are shaky, who do you trust with your money? A recent study provides useful insights into the value that different financial professionals offer.
-
How to Navigate Your Medicare Advantage Plan in a DisasterIf you're a Medicare Advantage member in an area that has been impacted by a disaster, you might be worried about access to care and medicine. Here's what you need to know.
