This is the average Social Security COLA in 2014

Next month will be a big one for retirees, as the Social Security Administration (SSA) will announce the upcoming 2025 cost of living adjustment (COLA).

The announcement is currently scheduled for October 10, although the adjustment won’t go into effect until January 2025. For those facing rising costs, the COLA can provide a much-needed boost in benefits.

While the exact COLA won’t be known until next month, it can be helpful to see where previous adjustments have landed to give you an idea of ​​what to expect. But regardless of where the 2025 COLA falls, there’s not-so-good news on the horizon for retirees.

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Average COLA: A Snapshot in History

The Social Security program has been around since 1935, but COLAs weren’t introduced until the mid-1970s. Back then, the adjustments were much larger than they are now. Between 1975 and 1982, COLAs ranged from 5.9% to 14.3%.

Now, however, beneficiaries are lucky to see COLAs reach even half of those numbers. January 2023 saw the largest adjustment in four decades at 8.7%, but it’s rare to see COLAs higher than 2% to 3% anymore.

Source: Social Security Administration.

Since 2014, the average COLA has landed at 2.6%. In some ways, it’s a good thing that these adjustments are much smaller than they were decades ago. COLAs are supposed to help benefits keep pace with inflation, so lower COLAs often signal that inflation is slowing.

However, inflation will often take a greater toll than the COLA can handle. According to a 2024 report by AARP, 69 percent of American adults 50 and older who say their financial situation worsened in the past year cite rising household costs as the reason. Also, nearly 40 percent say they are at least somewhat worried about being able to afford basic expenses in the future.

The average retiree in 2024 collects about $1,900 a month in benefits, according to the SSA. The average 2.6% COLA would equate to an increase of just under $50 per month. While this may be helpful, it is probably not enough to combat rising inflation.

Benefits lose purchasing power

If it feels like annual COLAs aren’t keeping up with rising costs, that’s because they aren’t—and that’s not a recent trend.

A 2024 report by the Senior Citizens League revealed that Social Security has lost 20 percent of its purchasing power since 2010, and the average recipient would need $370 more per month just to maintain the same purchasing power they would had it 14 years ago.

Additionally, while COLA is designed to help benefits keep up with inflation, it has historically not done a great job of doing so. In eight of the past 15 years, the inflation rate has exceeded the COLA for each of those eight years, The Citizens League report shows.

Inflation can disproportionately affect older people surviving on a fixed income. The COLA is based on the Consumer Price Index for Urban Wage and Service Workers, or CPI-W. This index measures price differences from month to month, but focuses on workersnot pensioners.

Because seniors tend to be more affected by necessary costs like housing and food (expenses that have risen exponentially in recent years), COLAs often underrepresent how badly inflation affects older adults. Because inflation remains high, even higher-than-average adjustments only go so far to help seniors keep up with rising costs.

Many seniors are eagerly awaiting the COLA announcement next month, and an increase in benefits can help make retirement a little more affordable. But by keeping realistic expectations about how far that increase will go, it will be easier to determine how much you can actually rely on Social Security.