Social Security is a key part of the income for millions of people in the United States, especially for retirees. In fact, Gallup surveys reveal that between 80% and 90% of retirees rely on this program as an important or at least complementary source of income. And here comes something crucial: the Cost of Living Adjustment, known as COLA, which determines how much payments will increase annually.
COLA (Cost of Living Adjustment) is a tool used by the Social Security Administration (SSA) to adjust benefits for inflation. The idea is simple: if the prices of products and services that older adults commonly buy rise, COLA increases the benefits so that they don’t lose purchasing power.
What is COLA and why does it matter so much for Social Security?
Since 1975, COLA has been calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index measures inflation by looking at over 200 categories of spending. However, only data from the third quarter (July to September) of each year is used to calculate the benefit increase. If the average CPI-W for the third quarter exceeds that of the previous year, benefits increase by the same percentage, rounded to the nearest tenth.
In 2025, COLA will be 2.5%, which represents a more modest increase compared to recent years, but still above the historical average of 2.3% over the past 15 years.
How much money will beneficiaries receive on average?
To understand the impact of COLA, let’s put some numbers on the table. According to SSA data, the average Social Security check in November 2024 was $1,788.12. With the 2.5% COLA increase, this amount will rise to $1,834.79 per month in 2025, which represents an increase of about $44.75 per month, or just over $22,000 annually.
But, be aware, not all beneficiaries receive the same amount. There are significant differences between retirees, people with disabilities, and survivors of deceased workers:
- Retirees: This group represents 75.6% of beneficiaries. The average check for a retiree will increase by $49, reaching $1,976 per month in 2025, or about $23,712 per year.
- People with disabilities: Around 7.24 million people in this group will see an increase of $38 in their monthly payments, reaching $1,580.
- Survivors: The 5.8 million survivors will also receive an average increase of $38, bringing their estimated monthly payment to $1,551.
What does this mean for beneficiaries?
Although the increase may seem small, especially in the face of rising inflation, every dollar counts for those who rely on Social Security to cover basic expenses such as food, housing, and medications. COLA ensures that beneficiaries do not lose ground against the rising cost of living.
The challenge, however, is to maximize these benefits. There are little-known strategies that could help you get more from Social Security in the future. Did you know that with the right adjustments, you could increase your annual income by thousands of dollars? It’s worth investigating how to make the most of this essential aid.
