The Social Security Administration has set the 2025 cost-of-living adjustment at 2.5%, the smallest annual increase in the COLA since 2021. While inflation has slowed from pandemic-era highs, some advocates for older Americans say the modest increase in Social Security benefits Retirees in the US are at risk of losing ground financially.

The 2025 COLA will add an average of about $50 to each monthly benefit check, the administration said.

The Social Security Administration announces its annual COLA each fall based on a measure known as the “Consumer Price Index for Urban Wage Earners and Clerical Workers,” or CPI-W, which tracks the average change in the prices certain workers pay for a pay a certain basket. of goods, during the third quarter, or from July to September.

Inflation has fallen sharply since hitting a 40-year peak in June 2022, but some senior groups argue that Social Security’s annual COLA is failing to keep pace with the financial needs of older Americans. That’s because the CPI-W tracks workers’ spending, and thus doesn’t accurately track retirees’ higher health care costs, which has eroded seniors’ purchasing power, they say.

“Many seniors will say that’s not really enough to keep up with prices,” said Bill Sweeney, AARP’s senior vice president of government affairs.

How COLA 2025 will change your benefits

The 2.5% increase in COLA will increase the average Social Security benefit by about $50 starting in January, the agency said Thursday.

According to the Social Security Administration, the average monthly benefit for retirees this year is about $1,927. After the 2.5% increase, that will rise to $1,976 per month. Couples who both receive Social Security will see their average benefit increase to $3,089 per month next year, up from $3,014 currently.

About 68 million Social Security recipients will see the new 2025 amounts starting with January 2025 payments. Another 7.5 million people receiving Supplemental Security Income (SSI) will start receiving their increased payments on December 31, 2024 , the agency said.

Some people receive both Social Security benefits and SSI, a program designed for people with disabilities and older, low-income Americans.

This is when you’ll get the 2025 COLA increase

Social Security recipients will get the first COLA increase for 2025 in their January benefits. Monthly payment dates are based on an individual’s date of birth:

• People born between the 1st and 10th of their birth month will receive their first COLA increase on January 8
• Those born between the 11th and 20th of their birth month will receive the COLA bump on January 15
• Recipients born between the 21st and 31st of their birth month will receive the new COLA on January 22

Meanwhile, people who started collecting Social Security before May 1997 or who receive both Social Security and SSI will get their new Social Security COLA on January 3.

People receiving SSI will receive their new COLA for 2025 with their payment due December 31, 2024.

Silver lining

Over the past three years, seniors have received above-average cost-of-living adjustments as inflation hovers well above the Federal Reserve’s annual target of 2%. But with inflation nearing the Fed’s target, the latest annual COLA reflects the silver lining of falling prices, AARP’s Sweeney said.

“We got a good message mixed with bad. The reason COLA is so low is because inflation is under control,” said Kelly LaVigne, vice president of consumer insights at Allianz Life. “Here’s the hard part: Great, inflation is under control, but seniors don’t really feel like they’re trapped.”

Meanwhile, Social Security COLA could remain relatively low for years to come, assuming inflation remains close to the Fed’s target, LaVigne added. And that has been the norm, with COLA averaging about 2.6% over the past two decades, according to the Senior Citizens League.

For 2024, Social Security recipients received a COLA of 3.2%. In 2023, the annual adjustment was 8.7% – the highest in nearly four decades as inflation soared – while the 2022 COLA was 5.9%.

Social Security COLA impact

“The automatic annual cost-of-living adjustment is one of the most essential and unique features of Social Security. It is intended to ensure that benefits do not erode over time,” said Nancy Altman, president of Social Security Works, an interest group.

But, she added, the current formula fails to fully cover the expenses of older Americans. That could be solved if the COLA were determined by another inflation measure known as the Consumer Price Index for Elderly Consumers, or CPI-E, which reflects price changes based on the spending of people age 62 and older.

Sherri Myers, an 82-year-old resident of Pensacola City, Florida, said the Social Security cost-of-living increase she will receive in January “won’t make a dent” in helping her daily life. expenditure.

Despite the increase, she is looking for work to supplement her retirement income, which consists of a small pension and her social security benefits.

“Inflation has eaten away at my savings,” she said. “I have nothing to fall back on; the pillow is gone.”

contributed to this report.