Social Security COLA expected to rise slightly in 2025: What you should know

At the beginning of each year, the Social Security Administration adjusts the amount of payments to beneficiaries based on a percentage increase in the cost of living. Since approximately 68 million people receive Social Security benefits, a great deal of attention is paid to this inflation adjustment of the amounts beneficiaries receive.

The COLA (cost of living adjustment) determines how much money your monthly payments will be increased by if you receive benefits. The government typically announces the adjustment for the next year a few months in advance in October. However, the closer the date gets, the more accurately experts who monitor inflation trends can predict what the COLA might be in 2025.

The latest estimate gives us a closer look at the official rate, which will be announced in a few months. We'll let you know below. For more information, check out four ways you could lose your Social Security benefits and how to estimate the amount of your Social Security benefits with this free online tool.

What is the Social Security COLA?

To account for the effects of inflation, welfare recipients typically receive an annual cost-of-living adjustment (COLA) with their January check. The adjustment is based on the average change in the prices of consumer goods and services over time and is set 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 is not the only government benefit affected by the COLA. Social Security Disability, Supplemental Income Insurance, Medicare, and the Supplemental Nutrition Assistance Program (including food stamps and other programs) also use the COLA to account for inflation when setting benefits.

How high could the COLA increase be in 2025?

The COLA for 2024 is 3.2%. The Senior Citizens League, a nonpartisan senior advocacy group, after looking at monthly inflation trends this year, predicts that the COLA for 2025 will be 2.57%, down from the July prediction of 2.63%.

“Our model suggests a significantly 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 that's not enough to cover inflation. According to a Senior Citizens League survey, 69 percent of respondents said their household costs rose faster than the COLA in the last year, with food and housing costs increasing the most.

Note: The Social Security Administration typically announces the adjustment in the second week of October. The new rate takes effect the following January.

Keep in mind that these are estimates and can change each month based on the previous month's inflation rate. While they tend to be roughly in line with the official rate, they are not always exactly right.

For more information, see the materials for applying for Supplemental Security Income and our Social Security and SSDI cheat sheet.