STATEN ISLAND, N.Y. — Nearly 70 million Americans receiving Social Security benefits are expected to see the smallest increase in their monthly benefits since before the COVID-19 pandemic.
Each year, Social Security benefits are subject to an annual cost-of-living adjustment (COLA) based on the rate of inflation to ensure that your monthly payment keeps up with rising costs.
Social Security recipients received a 3.2% COLA in 2024, a significant decrease from the 8.7% COLA in 2023, which was the largest increase in the past 40 years.
In 2025, using current inflation data from the Consumer Price Index, we estimate that the COLA will be 2.5% in 2025. According to the Senior Citizens League (TSCL).
The projected 2.5% increase would be the lowest since 2020, when monthly benefits increased by just 1.3%.
While the projected increase is lower than recipients have become accustomed to in recent years, COLAs have averaged 2.6 percent over the past 20 years, roughly in line with historical increases.
“Ensuring that seniors have enough food and shelter with dignity is the primary reason we advocate for a minimum 3% COLA,” said Shannon Benton, executive director of the Senior Citizens League. “TSCL research shows that nearly two-thirds of seniors rely on Social Security for more than half of their monthly income, and 28% are completely dependent on Social Security.”
The cost of living adjustment is determined using third-quarter data (July, August, September) from the Consumer Price Index for Urban Wage Earners and Clerical Employees (CPI-W).
These three-month inflation periods are added together, averaged, and compared to the average for the third quarter of the previous year, and the percentage difference between this year and the previous year is used as the COLA rate for the following year.
The Social Security Administration (SSA) formally announced its annual COLAs in October, meaning beneficiaries will have to wait a few more months to find out exactly how much their benefits will increase.
According to the SSA, approximately 67 million Americans will be receiving Social Security benefits on average each month in 2023, with total benefits paid out annually exceeding $1 trillion.
According to the administration, Social Security benefits account for about 30% of the income of Americans over 65.
Possible Changes to Coke Calculations
New federal legislation seeks to change COLA calculations to bring benefit amounts more in line with the costs seniors actually experience.
The Senior Citizen Benefits and Welfare Increase Act, introduced by Rep. Ruben Gallego, D-Ariz., proposes changing the way welfare payments are calculated for Social Security recipients.
If enacted, this bill would require the use of the Consumer Price Index for Americans age 62 and older to determine COLAs, instead of the Consumer Price Index for Urban Wage Earners and Clerical Employees (CPI-W) currently used.
The proposed changes are intended to more accurately reflect the inflation that seniors experience, particularly in areas such as health care, food and housing. Supporters argue that the CPI-W does not adequately capture the rising costs faced by seniors and would result in under-adjusted Social Security benefits.
“It's important that the COLA reflects how inflation affects seniors so we can pay our bills and get our Social Security benefits every month,” said Roman Ullman, president of AFSCME Arizona Association of Retired Persons Local 97.
The bill has garnered support from a variety of groups, including the American Federation of State, County and Municipal Employees, the American Federation of Retired Persons and the AFL-CIO. Pennsylvania Democrat Rep. Bob Casey has introduced a companion bill in the Senate.
If implemented, the new calculation method could increase monthly benefits for Social Security recipients and bring their payments more in line with actual costs incurred.
