Social Security’s most important day of the year is October 10: What you need to know about COLA 2025.

The most important day of the year for Social Security recipients is fast approaching. The Labor Department will release September inflation on Thursday, October 10 at 8:30 a.m. ET. With this information, the Social Security Administration will be able to calculate the cost of living adjustment (COLA) for 2025.

Rising prices have been a persistent problem in recent times. Americans have identified inflation as the most worrying financial issue for three years in a row, and the percentage of survey participants citing inflation reached a record high in 2024, according to Gallup.

In this context, the stakes related to the upcoming COLA announcement are particularly high. Here’s what Social Security recipients should know about October 10.

Image source: Getty Images.

The Social Security Administration will announce the 2025 COLA on October 10

Social Security benefits receive an annual cost-of-living adjustment (COLA) to help recipients keep up with rising prices across the economy. COLAs protect Social Security’s purchasing power by ensuring that benefits increase directly with a subset of the consumer price index known as the CPI-W.

Here’s how the math works: The CPI-W from the third quarter of the current year (July through September) is divided by the CPI-W from the third quarter of the previous year, and the percentage increase becomes the following year’s COLA . For example, the CPI-W increased by 3.2% in the third quarter of 2023, so social security benefits increased by 3.2% in 2024.

The Labor Department will release September’s CPI-W data on October 10 at 8:30 a.m. ET. This will be the last information needed to calculate the 2025 COLA. Retirees should expect a COLA press release from the Social Security Administration on the same day.

Social Security benefits are expected to grow by 2.6% in 2025

In August, The Senior Citizens League (TSCL), a nonprofit advocacy group, issued a downward revision to the COLA forecast. “The 2025 COLA forecast is around 2.57%, down from 2.63% last month,” said Alex Moore, TSCL statistician. However, these two estimates add up to the same COLA because benefit increases are rounded to the nearest tenth of a percent.

The chart below shows how a 2.6% COLA would change the average monthly pay for different types of Social Security recipients. All amounts are rounded to the nearest dollar.

Data source: Social Security Administration. The average payment before COLA is based on the average benefit in August 2024.

As shown above, the average retired worker would receive an additional $50 per month if Social Security benefits received a COLA of 2.6% in 2025. This is equivalent to an additional $600 for the entire year.

In December 2024, Social Security recipients will receive a COLA notice in the mail detailing the updated benefit amount for 2025. Alternatively, recipients can find their COLA notice in their Message Center. my social security account.

In closing, the estimated COLA of 2.6% would be the smallest increase that retired workers have received since 2021. In theory, benefits should increase at the same rate as inflation, but inflation affects everyone a little differently, depending on how they spend the money. Because of this, some retired workers may feel that their wallets are especially stretched next year.

In these situations, I have two recommendations. First, interest rates remain high, making high-yield savings accounts and certificates of deposit look attractive. Social Security recipients worried about their finances should consider putting money into one or both of these vehicles today.

Second, the life of the work platforms Fiverr and Upworkas well as DoorDash, Instacart, Lyftand Ubermakes it relatively easy to earn extra income. Social Security recipients struggling to make ends meet should consider part-time work if possible. A little extra cash could go a long way.