Social Security COLA: what is it, and why is it important?
Discover more about the Social Security cost-of-living adjustment (COLA), what it is, how it is calculated, and what to expect from 2025.
Summary
The Social Security COLA is an increase in benefits to help tackle inflation.
The COLA is calculated based on US inflation data and is released in October each year.
The 2025 Social Security COLA is expected to be lower than 2024, which was 3.2%.
A financial advisor can help you manage your finances and create a plan so you can reach your goals.
What is the Social Security COLA?
The Social Security cost-of-living adjustment (COLA) is an increase in benefits to help tackle inflation.
Each year, the Social Security Administration (SSA) examines US inflation data and decides if the benefit amount should be increased or not. If it is, they calculate the percentage amount it needs to rise by – this is known as a COLA.
So, how is the Social Security COLA calculated?
By law, the SSA has to use inflation data from the Bureau of Labor Statistics to calculate COLAs.
The calculation is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is determined by the Bureau of Labor Statistics in the Department of Labor.
The SSA compares the CPI-W from the third quarter of the current year against the third quarter of the previous year.
If there has been a percentage increase in the average CPI-W between the two figures, your benefit will increase by that amount.
If there is no change or a decrease, the SSA will not approve the COLA.
So, for 2025, the COLA will be based on the third quarter of 2024 against the third quarter of 2023.
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What is the 2025 Social Security COLA increase?
The 2025 Social Security COLA has not yet been announced; however, there is a lot of speculation about what the figure might be.
As inflation cooled in May 2024, many outlets are telling Social Security recipients to brace for bad news.
The forecast for the 2025 COLA has been revised downward and is now estimated at 2.6%, 0.1% lower than the previous estimate of 2.7%.
According to the National Association of Plan Advisors (NAPA), based on May’s inflation data, the 2025 COLA could range anywhere from 2.57% to 3%.
This would be a decrease on the 2024 figure of 3.2%, which many had already claimed was too low.
Below are the COLA estimates for the next few years, based on the SSA’s 2024 OASDI Trustees Report:
| Calendar year | COLA % (for the following year) |
|---|---|
| Calendar year | COLA % (for the following year) |
| 2024 | 2.60% |
| 2025 | 2.20% |
| 2026 | 2.40% |
| 2027 | 2.40% |
| 2028 | 2.40% |
| 2029 | 2.40% |
| 2030 | 2.40% |
| 2031 | 2.40% |
| 2032 | 2.40% |
| 2033 | 2.40% |
This could all change based on the inflation data at the time of the calculation.
However, it remains unlikely retirees and other Social Security benefit recipients will receive a higher increase in 2025 than they received in 2024, meaning budgets and financial and retirement plans may need updating.
When is Social Security COLA announced?
The Social Security COLA is typically announced in the middle of October each year.
Although announced in October, the increase doesn’t come into effect until January of the following year.
For 2025, the estimated COLA percentage release date is October 10.
Who is eligible for Social Security COLA?
Those who receive Social Security benefits are eligible for the COLA.
For example, retirees who are 62 or older and have worked and paid Social Security taxes for 10 years or more are eligible for Social Security and, therefore, eligible for COLA.
It is worth noting, however, that if you choose to retire at 62, your Social Security check will be reduced. Your full benefits only become available once you reach full retirement age. For those born during or after 1960, this is 67.
Aside from retirees, those with a disability, a survivor of someone who paid Social Security taxes before they died, or a specific family member of someone who received the payment may also be eligible.
What was the Social Security COLA for 2024?
In 2024, the cost-of-living adjustment was 3.2%, which equates to approximately $55 more in your monthly benefit check.
This increase applied to over 66 million people who receive Social Security payments and came into effect in January 2024.
As of May 2024, the average monthly Social Security check was $1,778.24.
While the extra money was welcome, it was much lower than the increase in 2023, which saw an 8.7% rise in the COLA – the highest in over 40 years.
Alongside the payment increase in 2024, the maximum earnings subject to Social Security increased to $168,600.
The earnings limit for workers who are younger than the "full" retirement age increased to $22,320.
For those who reached their “full” retirement age in 2024, the limit increased to $59,520. There is no limit on earnings for workers who are "full" retirement age or older for the entire year.
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Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.