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Social Security COLA For 2025: The Cost-of-Living Adjustment Information

In 2025, Social Security's Cost-of-Living Adjustment (COLA) is expected to be 2.66% less than inflation, causing financial strain for many older Americans amidst rising expenses, especially food costs.

by S Samayanka

Updated Jun 07, 2024

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Social Security COLA For 2025: The Cost-of-Living Adjustment Information

Social Security COLA

Social Security COLA stands for Cost-of-Living Adjustment. It's like a raise in your Social Security benefits to help keep up with inflation. So, when the cost of living goes up, your Social Security payments might go up a bit too, to help you keep pace with those increased expenses. 

It's a way to make sure people on Social Security benefits can afford the things they need as prices change over time.

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Social Security COLA For 2025 

  • The COLA for Social Security in 2025 is expected to be 2.66% less than expected inflation.
  • For 2024, the COLA is 3.2%, but 71% of older Americans say it isn’t sufficient to meet their increasing costs.
  • With the low COLA for 2025, many older Americans are going to be struggling.
  • The average monthly Social Security benefit in 2024 will be $1,907, and after increased Medicare costs, there will be only a minor net increase.
  • In a survey, about 43% said their monthly expenses increased by at least $185 in 2023 compared to the previous year.
  • Food expenses have gone up a lot, and 61% mentioned this as their largest increased expense.
  • The USDA-recommended food budget has increased by 27% since 2020, and this adds to Americans’ economic worries.
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How is Social Security COLA Determined?

  • COLA stands for "Cost of Living Adjustment." It's a way to increase Social Security benefits to keep up with inflation.
  • They figure out COLA based on changes in the prices of everyday goods and services. They use something called the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is calculated monthly.
  • They compare the CPI-W average from the third quarter of the current year to the average from the third quarter of the last year when they had a COLA.
  • If the CPI-W average goes up, they increase benefits by that percentage. If it didn't go up or the increase is too tiny to matter, they don't increase benefits.
  • They round the increase to the nearest tenth of a percent. So, if the increase is 3.2%, they round it to 3.2%.
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What is the Prediction for Social Security COLA 2025?

The prediction for Social Security's COLA in 2025 is 2.66%. This prediction comes from the Senior Citizens League, based on data from April showing a 3.4% increase. Originally, the estimate was 2.6% when March's data was at 3.5%. 

However, it's important to remember that this is just a guess. The actual COLA is determined later in the year, using data from July to September. So, we won't know for sure until then. Over the past decade, COLA has ranged from 0.0% in 2016 to 8.7% in 2023. The worry is that the predicted 2.66% increase might not be enough. 

In 2024, the average Social Security benefit went up by $50.00, but after covering Medicare Part B premium increases, the actual increase was only $40.20 a month. This raises concerns that seniors may still face financial insecurity in 2025.


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What are the Benefits of Social Security COLA?

COLA for Social Security helps in five ways:

  • Retirement:

Thinking about retirement? Social Security can help you determine when and how much you will receive. You can even do it online without having to come into an office.

  • Disability:

Sick or injured and can’t work? Social Security may offer you money to help with expenses. They can explain the process and how to handle your benefits.

  • Medicare:

If you are 65 or older or have a special need, Social Security can assist you in obtaining Medicare and health insurance. They collaborate with Medicare to ensure you receive the assistance you require.

  • Survivors:

Did you lose a loved one? Social Security may assist you with financial expenses. They offer monetary assistance to widows, widowers, and children of deceased individuals.

  • Supplemental Security Income (SSI):

Disabled people, disabled children, and elderly individuals on a very limited income may receive additional funds from Social Security. They provide additional money to those in need.

What Does the 2025 Cola Increase Imply for Your Retirement?

The 2025 COLA increase predicts how much more money retirees might get in their Social Security checks. But we won't know for sure until October 2024. This increase aims to help retirees deal with higher prices, but it might not cover all their extra costs, like Medicare premiums.

The problem is that the increase might not keep up with how much prices are going up.The 2024 increase wasn't as much as retirees hoped. Now, the prediction for 2025 says it might be even less. But we'll have to wait to know for sure.

Social Security COLA For 2025 - FAQs

1. What is Social Security COLA?

It's like a raise in Social Security benefits to match the rising cost of living.

2. How is Social Security COLA determined?

It's based on changes in the prices of everyday goods and services using the Consumer Price Index.

3. What's the prediction for Social Security COLA in 2025?

It's estimated at 2.66%, but the actual amount isn't known until later in the year.

4. What are the benefits of Social Security COLA?  

It helps with retirement, disability, Medicare, survivors' benefits, and Supplemental Security Income for those in need.

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