Social Security cost-of-living adjustment (COLA) increase for 2025
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BLUEPRINT
Published 2:54 p.m. UTC April 10, 2024
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Key points
- The Social Security COLA for 2024 is 3.2%.
- The COLA increases Social Security payments to help benefits keep pace with inflation.
- Most retirees received a bump of more than $50 per month this year.
Millions of Americans depend on Social Security payments to make ends meet. Retired workers are the largest group of beneficiaries, but children, spouses and disabled individuals may also receive these benefits from the government.
While Social Security benefits are initially calculated using a worker’s earnings record, monthly payments would quickly lose purchasing power if they never changed. To prevent that from happening, legislation enacted in 1973 instituted annual cost-of-living adjustments, which began in 1975.
Known as COLAs, these cost-of-living adjustments can vary significantly from year to year. Some say they don’t adequately reflect increases in senior expenses. The Social Security COLA for 2024 is 3.2%.
COLA 2025 estimate
The Senior Citizens League has adjusted its 2025 COLA forecast to 2.6%. This estimate changes each month based on the most recent consumer price index data.
The COLA is calculated based on figures from the consumer price index for urban wage earners and clerical workers. The Bureau of Labor statistics calculates the CPI-W every month. CPI-W figures from July through September are what ultimately determines the final COLA amount each year.
The CPI-W rose 3.5% year over year in March. The consumer price index for all urban consumers also increased 3.5%.
“If the COLA increases by 2.6%, that will be an approximately $45 increase. What can you buy for that? Not much,” said Shannon Benton, executive director of TSCL.
COLA 2024
According to the Social Security Administration, Social Security retirement benefits increased by more than $50 per month in 2024 on average.
The average monthly check for a single retired worker rose to $1,907 in 2024 from $1,848 in 2023. A retired couple receiving benefits received an average monthly check of $3,033 in 2024, compared with $2,939 in 2023.
Datalign Advisory
What is a Social Security benefits COLA?
Most years, the Social Security COLA is an increase in a beneficiary’s monthly payment amount. Just as workers may receive annual cost-of-living increases in their wages or salaries, Social Security recipients generally receive a boost in benefits each January.
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“It’s not really a bonus,” said Judi Leahy, a senior wealth advisor with Citi Personal Wealth Management in Rye, New York, although some may see it that way.
Instead, the COLA is intended to help benefits keep pace with inflation. On the rare occasions when there is no inflation, Social Security payments will remain flat the following year.
How the Social Security benefits COLA is calculated
The Social Security Act stipulates that the consumer price index be used to determine COLAs. But several variations of the CPI are available.
As mentioned, the Social Security COLA is tied to the CPI-W, which is the consumer price index for urban wage earners and clerical workers. This index is calculated by the federal Bureau of Labor Statistics each month. The Social Security COLA uses the rate of the CPI-W in the third quarter of the year — ending on Sept. 30 — to determine the following year’s COLA.
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That means the Social Security COLA for 2025 will be calculated by comparing the third-quarter CPI-W from 2024 to the third-quarter CPI-W from 2023. If there is an increase in the CPI-W, Social Security benefits are adjusted by that percentage. Should the CPI-W decrease or remain flat, benefits do not change the next year.
Is the Social Security COLA calculation fair?
The use of the CPI-W is not without controversy, and some people advocate for the Social Security Administration to use a different version of the consumer price index.
“They have a right to change those indexes,” said Chuck Czajka, founder of Macro Money Concepts in Stuart, Florida.
While the CPI-W looks at inflation as it affects certain workers, it may not capture some costs that seem to disproportionately impact seniors.
“Health care costs are probably the biggest indicators that are outpacing these inflation rates,” said Megan Slatter, wealth advisor with Crewe Advisors in Salt Lake City.
To address that concern, it has been suggested that the Social Security Administration use the CPI-E, which is an experimental measure intended to better reflect the expenses of Americans aged 62 or older. Still, switching to the CPI-E would not guarantee larger annual increases for Social Security beneficiaries.
For instance, in 2023, the CPI-E was lower than the CPI-W, according to The Senior Citizens League. If the Social Security Administration had used the CPI-E, retirees would have seen an 8% increase in benefits instead of the 8.7% bump they received.
But using the CPI-E would benefit seniors in other years. For example, in 2024, the CPI-E is 4%, higher than the 3.2% COLA. According to calculations by TSCL, using the CPI-E would have resulted in higher COLAs in seven out of the past 10 years.
Others argue that using the CPI-W results in COLAs that are too generous. The Cato Institute, a libertarian public policy organization, has suggested the CPI-W be replaced by the chained CPI. The chained CPI aims to provide a more accurate estimate of changes in the cost of living by assuming that when prices increase, people settle for cheaper substitutes. If this calculation had been used, Social Security COLAs would have been 0.32% lower overall from 2013 to 2022.
“The so‐called chained CPI would protect seniors’ purchasing power while extending Social Security’s ability to provide benefits,” the Cato Institute said.
For now, it doesn’t appear there are plans to change how the Social Security COLA is calculated, and it will likely continue to be based on the CPI-W for the foreseeable future.
COLA benefits
COLA is applied to a person’s primary insurance amount, which is the amount of Social Security benefits they would receive at their full retirement age. Those who begin benefits early receive a reduced payment, while those who delay the start of Social Security get a larger amount.
Even those who receive the full 3.2% this year may find that it doesn’t adequately cover their increased costs. In that case, it may be necessary to consider ways to bridge the gap.
“When you start looking at retirement, there are many different avenues that could be used to make up that money,” Leahy said. Some retirees may return to work, while others may turn to financial products such as annuities that promise guaranteed income.
When will the Social Security COLA increase take effect?
The 3.2% COLA went into effect in January 2024.
Unlike job salaries, which may provide predictable cost-of-living increases each year, Social Security COLAs can vary dramatically.
And because COLAs are tied to the CPI-W, they aren’t guaranteed to increase every year, Slatter said.
As the table below shows, Social Security recipients have gone more than a year without an increase in their benefit amount.
History of COLAs
| YEAR | COLA | YEAR | COLA |
|---|---|---|---|
| 2024 | 3.20%
| 2016 | 0.00%
|
| 2023 | 8.70%
| 2015 | 1.70%
|
| 2022 | 5.90%
| 2014 | 1.50%
|
| 2021 | 1.30%
| 2013 | 1.70%
|
| 2020 | 1.60%
| 2012 | 3.60%
|
| 2019 | 2.80%
| 2011 | 0.00%
|
| 2018 | 2.00%
| 2010 | 0.00%
|
| 2017 | 0.30%
| 2009 | 5.80%
|
Frequently asked questions (FAQs)
All Social Security beneficiaries received an increase in their benefits thanks to the 2024 COLA.
While the COLA is 3.2%, the actual percentage change in your benefits could be different if you started Social Security before or after your full retirement age.
Thanks to reduced inflation this year, the 2024 COLA is significantly lower than the 2023 increase of 8.7%.
Still, the 3.2% COLA for 2024 is higher than the 20-year average of 2.6%. During the period of economic expansion after the 2008 recession, Social Security COLAs were typically less than 2% and even hit 0% in 2010, 2011 and 2016. For those years, Social Security beneficiaries saw no increase in their monthly payment amount.
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