Social Security 2025 COLA prediction: Here’s how much the average retiree can expect in benefits each month

Millions of older adults depend on Social Security for retirement, but the program faces some serious financial challenges. 87 percent of U.S. adults say they worry about the future of Social Security to some degree, according to a 2024 Gallup poll, with 43 percent of that group admitting they worry “a lot.” With potential benefit cuts looming, it’s a fair concern.

For those who rely on their benefits to make ends meet, the annual cost of living adjustment (COLA) is something to look forward to. The COLA is designed to help Social Security keep up with inflation, and as rising costs continue to take a bite out of retirees’ budgets, any extra benefits can go a long way.

Although the official COLA won’t be announced until October, some experts are already making predictions for the 2025 adjustment. Here’s how much the average retiree could expect to receive starting next year.

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COLA 2025: What retirees can expect

The COLA is based on third-quarter inflation data from the Bureau of Labor Statistics — specifically, changes in the Consumer Price Index for Urban Wage and Service Workers (CPI-W). The Social Security Administration averages the CPI-W values ​​from July, August, and September. If the current year’s value is greater than the previous year’s, the difference will be the next year’s COLA.

We won’t know the official COLA until October, after the September inflation data is released by the Bureau of Labor Statistics. But analysts at The Senior Citizens League, a nonprofit advocacy group, make monthly COLA predictions based on year-round inflation data.

According to the most recent estimate published in August, the estimated COLA for 2025 is 2.57%. This is slightly lower than the July forecast of 2.63% and the actual 2024 COLA of 3.2%.

However, any extra money in benefits is still helpful for many people. The average amount of benefits among retired workers is about $1,919 per month, according to July 2024 data from the Social Security Administration. If the 2025 COLA goes to 2.57%, that would mean an extra $49 per month for the average retiree.

There is more bad news for retirees

COLAs are inherently a good thing, but they gradually become less useful over time as costs continue to rise. While COLAs are ALLEGED to keep up with inflation, benefits still struggle to maintain purchasing power.

Since 2010 alone, Social Security benefits have lost 20 percent of their purchasing power, according to a 2024 report by the Senior Citizens League. The study also found that retirees would need an extra $370 per month to maintain the same purchasing power as they would have had in 2010. By comparison, the extra $49 per month that retirees could receive in 2025 seems disappointing.

Then there’s the separate issue of Social Security’s depleting trust funds. While the program isn’t going away, once the trust funds are depleted, Social Security’s remaining revenue streams will only be enough to cover about 83 percent of future benefits, according to a 2024 report by the Social Security Administration. In other words, payments could be reduced by up to 17%.

The trust funds are currently expected to run out by 2035, assuming lawmakers don’t come up with a solution before then. Between these potential cuts and the declining purchasing power of Social Security, benefits aren’t nearly as reliable as they used to be.

How to prepare right now

For most people, the best thing you can do is stay on top of the situation and keep your expectations in check. Annual COLAs can go a long way if money is tight, but they’re not as sure a solution to rising costs as some people think.

If you have other sources of income — whether it’s a pension fund, a pension, or a passive income source, for example — it may be wise to focus more on those and less on Social Security. Benefits could continue to lose purchasing power or face steeper cuts, and the more alternative sources of income you have, the less Social Security challenges will affect your finances.

Many retirees are eagerly awaiting the announcement of the 2025 COLA. While there’s nothing wrong with counting on the benefit increase, by keeping realistic expectations about how far it will go, you can better protect your retirement.