Potential Social Security COLA 2025 increase: What to expect


While the inflation rate is trending downwards, retirees’ budgets are still stretched thin. Over the past few years, above-average inflation has meant significant Social Security-cost-of-living adjustments. Will this trend continue? How big a Social Security COLA will retirees get in 2025?

What was the Social Security COLA for 2024?

The Social Security COLA for 2024 was 3.2%. Although this SS COLA was much higher than most years, it was still much lower than the 2023 Social Security COLA.


What was the Social Security COLA for 2023?

Retirees received a massive Social Security COLA of 8.7% for 2023. While this was a considerable increase in income for many retirees, it likely barely kept up with their increased living costs.

How big will the 2025 Social Security COLA be?

We’ll have to wait until October for the actual 2025 SS Cola to be announced. But you should be prepared for the fact that this number will be the lowest in the last few years. The 2025 Social Security COLA could be below 2%.

If we used the January reading of the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, the Senior Citizens League estimates the 2025 Social Security COLA will be only 1.75%. However, at this stage of the year, next year’s final COLA is likely to be different. Either way, retirees receiving Social Security are on track to see a much lower COLA in 2025 than in 2023 or 2024.

How the 2025 Social Security COLA will be calculated,

To calculate the Social Security cost-of-living adjustment for 2025, the Social Security Administration (SSA) uses average inflation in the third quarter, based on the CPI-W, to calculate how much Social Security benefits will increase. Increase will be required for the next year.

Does Social Security COLA matter to retirees?

Social Security is an important part of many Americans’ retirement income stream. For some people, it is their primary source of income for retirement. I hope you have a fun financial planner who has done such a wonderful job for you that you don’t even notice the Social Security COLA each year. Sadly, this is not the case for many retirees. According to the Social Security Administration, about 12% of men and 15% of women rely on Social Security for more than 90% of their retirement income.

For 2024, the average Social Security check will average $1,907 per month.

What is the maximum Social Security benefit?

According to the Social Security Administration, the maximum earnings benefit will depend on the age when you retire and begin taking benefits. For example, if you retire at full retirement age in 2024, your maximum Social Security benefit will be $3,822. However, if you retire early in 2024 at age 62, your maximum Social Security benefit will be $2,710. If you wait to retire at age 70 in 2024, your maximum benefit will be $4,873.

Keep in mind these are the maximum Social Security benefits. Most retirees receive very little income from Social Security. Your monthly amount will be determined based on your income before you retire, and keep in mind that these checks won’t come close to compensating your pre-retirement income. You should do some additional retirement planning to ensure that you can maintain your standard of living in retirement.

How to Get a Personalized Social Security Estimate

As a fiduciary financial planner, I encourage you to download your Social Security Estimate from ssa.gov. This will give you an estimated retirement benefit based on your work history and the age you can expect to be and the age you want to start receiving benefits. These estimates are generally updated annually.

Knowing your potential Social Security benefits can help you understand what else to do and plan to reach financial independence.

Social Security benefits weren’t meant to replace your entire income in retirement, and you’ll likely need to invest in IRAs, Roth IRAs, 401(k)s, or other retirement accounts. Obviously, Social Security is a lifetime benefit that must be paid as long as you live.COLA

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