Social Security’s 2025 COLA Announced in Less than 2 Months — But Bad News Is Likely to Come

Living off Social Security alone is not optimal, and neither is being in a position where most of your income comes from those monthly benefits. Unfortunately, this is the position many seniors find themselves in today. And that means annual Social Security cost of living adjustments, or COLAs, are extremely important.

COLAs allow Social Security recipients to maintain their purchasing power as inflation increases the cost of living. Each year, benefits are eligible for an automatic COLA, which is calculated based on third quarter inflation data.

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Specifically, Social Security COLAs are determined based on changes in the Consumer Price Index for Urban Wage and Service Workers (CPI-W) for the months of July, August, and September. While the July CPI-W data should become available soon, we will have to wait longer for the August and September data.

But October 10 is when September’s CPI-W reading should become available. From there, the Social Security Administration can announce an official COLA. But whether the seniors end up satisfied with this number is another story.

Retirees should brace themselves for some bad news

The COLAs Social Security recipients have received in recent years have been quite generous. In 2024, benefits increased by 3.2%. In 2023, they rose by 8.7% after a period of rampant inflation in 2022.

But next year’s COLA is expected to be much lower. We won’t know how much lower until October.

Initial estimates call for a 2025 COLA of 2.63%. But based on how inflation has played out, it’s fair to say that number could go down.

Of course, even if the Social Security COLA in 2025 ends up being slightly higher than 2.63%, the reality is that it likely won’t be able to keep up with inflation. The reason? They almost never do.

A recent Motley Fool poll of retirees found that 62% think the 3.2% COLA in 2024 is insufficient. And 44 percent of respondents considered going back to work because Social Security doesn’t pay them enough to cover their expenses.

Aim to rely less on your Social Security COLA

Current retirees may have no choice but to hope for the best in next year’s COLA. But if you’re not yet retired, you have a great opportunity to prepare to worry less about your Social Security COLA in the future — namely, by saving more today.

The more of a nest egg you bring with you into retirement, the less dependent you will be on Social Security overall. And even if you’re doing well in your career, you can still bounce back if you commit to spending wisely and prioritizing contributions to your 401(k) or Individual Retirement Account (IRA).

In fact, let’s say you’re 50 years old and have nothing saved. If you spend the next 20 years buying $500 a month and your portfolio delivers an average annual return of 8%, which is slightly below the stock market average, you’ll end up with a nest egg worth about $275,000. That’s more than the $200,000 median retirement savings balance among Americans ages 65 to 74, according to the Federal Reserve.

Another way to become less dependent on your Social Security COLA in the future is to delay benefits past full retirement age. If you can hold out until age 70, you can give your monthly paychecks a big boost. That way, even if the COLAs you get end up being stingy, you’ll be starting out with a much higher base value.