The average Social Security payment is increasing by $48 a month next year.
The Social Security Administration announced a 2.5% cost of living adjustment (COLA) in 2025 on Thursday, marking the smallest increase since 2021. The average COLA was 2.6% over the past decade, with a change in 2024 of 3.2%, according to the administration.
About 68 million beneficiaries and about 7.5 million people receiving Supplemental Security Income payments will see their checks increase by 2.5% on January 1, 2025, and December 31, 2024, respectively.
The increase is based on inflation between July, August and September. July’s consumer price index showed inflation hit a three-year low of 2.9%. The inflation rate for August is very good, reaching 2.5%, while that of September was 2.4%. Based on low inflation numbers, the Federal Reserve lowered the federal funds rate, which affects everything from mortgage rates to credit card interest rates, for the first time in four years in September.
Related: Fed Rate Cut Finally Happens For First Time In 4 Years. Here’s How The Decision Will Affect Your Wallet.
How is COLA calculated?
COLA takes the rate of inflation among urban wage earners and clerical workers from July to September and calculates the difference between this year’s rate of inflation and last year’s to arrive at a percentage.
Is there another way to calculate?
Some groups do not allow you to calculate COLA as it is now. The Senior Citizens League (TSCL) advocates relying on the CPI-E, which measures inflation for Americans age 62 and older, instead of the CPI-W, which measures inflation among urban wage earners and clerical workers.
“This year represents another missed opportunity to give seniors the financial assistance they deserve by changing the COLA calculation from CPI-W to CPI-E, which would better reflect seniors’ changing costs,” TSCL executive director Shannon Benton said in a statement. release.
Is COLA enough?
TSCL estimated that the average Social Security check would increase by $48 from $1,920 to $1,968. That may not be enough, says AARP CEO Jo Ann Jenkins.
“Even with these adjustments, we know that many older Americans who rely on Social Security may find it difficult to pay their bills,” Jenkins said in a press release. “Social Security is the primary source of income for 40% of American adults.”
Related: Are You Really On Your Way to a Good Retirement? A Financial Expert Reveals Important Steps to Take at Every Age – Plus 3 Common Considerations.
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