The Social Security Administration at the start of each year adjusts how much it will pay out to beneficiaries based on a percentage increase in cost-of-living expenses. With around 68 million people receiving Social Security benefits, this inflation adjustment in the amount of money beneficiaries get receives a lot of attention.
The COLA (cost-of-living adjustment) will determine how much more money will be added to your monthly payments, if you receive benefits. The administration typically announces the next year's adjustment a few months ahead of time in October. However, as we get closer to the date, experts looking at inflation trends can make fairly accurate predictions of what 2025's COLA could be.
The latest estimate gives us a closer glimpse as to what could indeed be the official rate when announced in a few months. We'll fill you in below. For more, check out four ways you can lose your Social Security benefits and how to estimate your Social Security benefits amount with this free online tool.
What is the Social Security COLA?
To keep up with the effects of inflation, Social Security recipients usually receive an annual cost-of-living adjustment, or COLA, with their January check. The adjustment is based on the average change over time in the prices paid for consumer goods and services and is determined by the Bureau of Labor Statistics in the Department of Labor. The Social Security Administration sets the COLA in the third quarter of each year.
Which government benefits make benefit adjustments using COLA?
Social Security isn't the only government benefit that is affected by the COLA. Social Security Disability Insurance, Supplemental Security Income, Medicare, Supplemental Nutrition Assistance Program (including food stamps and other programs) all use COLA to account for inflation when setting benefits.
What could the COLA increase be in 2025?
COLA for 2024 is 3.2%. Looking ahead, the Senior Citizens League -- a nonpartisan advocacy group for senior citizens -- after looking at this year's monthly inflation trends forecast COLA will be 2.57% for 2025. This is down from July's prediction of 2.63%.
"Our model points to a substantially lower cost-of-living-adjustment (COLA) for next year," the group said in a statement.
The adjustment is closely watched by seniors because the annual COLA change is designed to help them keep up with rising costs. And while the annual COLA increase has been as high as 8.7% in recent years, some say it's not enough to cover inflation. According to a Senior Citizens League survey, 69% of respondents said their household costs rose faster than the COLA last year, with costs for food and housing leading the way.
COLA Increases Year Over Year
| Year | Increase over previous year |
|---|---|
| 2024 | 3.2% |
| 2023 | 8.7% |
| 2022 | 5.9% |
| 2021 | 1.3% |
| 2020 | 1.6% |
Note: The Social Security Administration normally announces the adjustment the second week of October. The new rate goes into effect the following January.
Keep in mind that these are estimates that can change every month based on the previous month's inflation rate, and though they tend to be somewhat in line with the official rate, they're not always spot on.
For more, check out how to apply for Supplemental Security Income and our Social Security and SSDI cheat sheet.