Social Security Benefits Get a Cost of Living Adjustment (COLA) in 2025. Here’s How Much Your Check Could Grow

A recent Nationwide Retirement Institute survey found that two-thirds of adults don’t know that Social Security benefits are inflation-protected.

Fortunately, retired workers and other Social Security recipients receive annual cost-of-living adjustments (COLAs) designed to compensate for inflation. Those scheduled wage increases protect the purchasing power of benefits. For example, the Consumer Price Index (CPI) — a popular measure of inflation — has risen 66 percent over the past two decades. Meanwhile, COLAs added 67 percent to Social Security benefits.

The Social Security Administration will announce the official COLA for 2025 on Thursday, October 10. Here’s what to expect.

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The Social Security COLA 2025 will be announced on October 10

Social Security’s annual cost of living adjustments (COLAs) are based on how inflation changes in the third quarter, which runs from July to September. In this scenario, a subset of the consumer price index known as CPI-W is used to measure inflation.

Here’s how the math works: The current year’s third quarter CPI-W is divided by the previous year’s third quarter CPI-W, and the percentage increase (if any) becomes the COLA in subsequent years. Importantly, COLAs cannot be negative. So if the third quarter CPI-W falls in a given year, benefits are not adjusted downward.

Based on this information, the Social Security Administration cannot calculate the official COLA for 2025 until September inflation data is available. The US Bureau of Labor Statistics will release this information on Thursday, October 10 at 8:30 a.m. ET.

Social Security benefits are projected to grow 2.6% to 3.1% in 2025

Several third parties have made forecasts about COLA 2025. The Senior Citizens League (TSCL), a nonprofit senior advocacy group, expects benefits to increase 2.6 percent next year. The chart below shows how this would impact the average payout for different types of beneficiaries.

Data source: Social Security Administration. Average benefit before COLA is based on August 2024 payments.

The Congressional Budget Office (CBO) is a nonpartisan agency that supports the congressional budget process with independent analyzes of budget and economic issues. CBO issued a slightly higher COLA forecast than TSCL, estimating that benefits will rise 3.1% next year. The chart below shows how this would impact the average payout for different types of beneficiaries.

Data source: Social Security Administration. Average benefit before COLA is based on August 2024 payments.

The forecasts we have discussed may be subject to change depending on the evolution of inflation through September. But the estimates provided by TSCL and CBO imply the lowest COLA in 2021. This has positive and negative implications.

A lower COLA indicates that inflation is falling, meaning that money will lose purchasing power less quickly. This is a good thing. By design, COLA reimburses Social Security recipients for lost purchasing power benefits in the previous year. This means that beneficiaries are constantly behind the curve when prices rise.

Indeed, many Social Security recipients feel they have fallen behind inflation. A TSCL study suggests that the purchasing power of Social Security benefits has fallen 20 percent since 2010 as COLAs have failed to keep pace with rising prices. In this sense, a lower COLA is bad news because it’s unlikely to make much of a difference for people struggling to make ends meet.