Social Security COLA rises with increasing inflation pressure
A look at Social Security’s adjustments for inflation, including the increase in the cost-of-living adjustment (COLA) to 3% for 2025 and the increase in the Consumer Price Index (CPI).
A cooling of inflation is likely to lead to a modest adjustment in the cost of living for those receiving welfare benefits.
Currently, it is estimated that Social Security benefits could see a so-called COLA increase of 2.5% in 2025. If true, that would be the smallest cost-of-living adjustment in three years. The COLA increase in 2024 was 3.2%.
The estimate is based on the latest inflation figures for August, released on September 11, as well as the inflation data for July. All that is needed is the next inflation data for September.
The Social Security Administration releases the actual amount for the cost-of-living adjustment each October, once more inflation data is available. The September Consumer Price Index is scheduled to be released on October 10.
To determine the upcoming COLA number, inflation figures for the third quarter of this year are compared with those for the third quarter of the previous year.
More: Social Security benefits likely to rise in 2025 due to inflation: What you should know
The consumer price index rose a seasonally adjusted 0.2% in August, the same increase as in July, according to the U.S. Bureau of Labor Statistics. Compared to a year ago, the consumer price index rose 2.5% in August before seasonal adjustment.
While some might find the latest estimate disappointing, a 2.5% COLA for Social Security benefits would be about average, according to independent Social Security and Medicare policy analyst Mary Johnson.
In 2023, there was an 8.7% COLA increase for Social Security benefits and Social Security supplemental benefits for retirees and others. This was the largest inflation adjustment since 1981, when the COLA increase was 11.2%.
In 2022, the cost of living adjustment for social security benefits was 5.9%.
The cost-of-living adjustment was just 1.3% in 2021 – one of the smallest increases since 1975, when Social Security introduced automatic annual living allowances. In 2020, it was 1.6%.
Next year, retirees who receive an average pension of $1,870 could get $46.75 more per month – or $561 per year. But the money won’t go straight into their wallets.
Medicare Part B premiums will also increase in 2025. The amount of the premiums will be announced later this year. It is possible that an additional $10 per month will be spent on these premiums next year.
Johnson noted that earlier this year, the Medicare Trustees estimated that the Part B premium would be $185 per month in 2025, an increase of $10.30 from $174.70 in 2024. The Part B premium, as well as any voluntary tax deductions, are automatically deducted from the monthly benefit amount by the Social Security Administration.
Contact personal finance columnist Susan Tompor: [email protected]. Follow her on X (Twitter) @tompor.
