The Cost of Living Adjustment, more commonly known as COLA, increases benefits administered by the SSA on a yearly basis. The COLA is designed to keep Social Security retirement, survivor and disability payments in line with inflation, so that purchasing power is not eroded over time.
The first adjusted payments will be made in January 2025 for retirement benefits, and for those who collect Supplemental Security Income (SSI), benefits will be increased in December this year.
Each year, the COLA is based on the average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) in the third quarter of the current year and the average in the same period of the previous year. If any increase occurs, that percentage is rounded to the nearest 10th of 1 percent, and becomes the annual COLA.
The 2.5 percent increase will mean a benefit recipient receiving $1,870 per month from SSA could see their monthly payment rise about $46.80 next year, according to Independent Social Security and Medicare policy analyst Mary Johnson.
The 2025 COLA will be the lowest received by Social Security beneficiaries since 2021, at the same time inflated prices persist on key essentials such as housing, meats, auto insurance, any type of service and repairs, however a 2.5 percent adjustment would be considered about average.