Social security payments to rise by 2.5%: what it means


The average Social Security payment is increasing by $48 a month next year.

The Social Security Administration announced Thursday the 2.5% cost of living adjustment (COLA) for 2025, marking the smallest increase since 2021. The average COLA was 2.6% over the past decade, with the 2024 change to 3.2%. according to the administration.

Nearly 68 million Social Security recipients and almost 7.5 million people who receive Supplemental Security Income payments will see their checks increase by 2.5% on Jan. 1, 2025, and Dec. 31, 2024, respectively.

The increase is based on inflation during the months of July, August and September. The consumer price index for the month of July showed that inflation hit its lowest level in three years to 2.9%. August inflation rate it was even lower, with 2.5%, and that of September was 2.4%. Based on lower inflation numbers, the Federal Reserve lowered the federal funds rate, which affects everything from mortgage rates to credit card interest rates. for the first time in four years in September.

Related: A Fed rate cut finally happened for the first time in 4 years. Here's how the decision will affect your wallet.

How is COLA calculated?

The COLA takes average inflation among urban wage earners and white-collar workers from July through September and calculate the difference between the average inflation of this year and that of last year to arrive at a percentage.

Is there any other way to calculate?

Some groups do not approve of the COLA calculation as it is now. The Senior Citizens League (TSCL) defends the computing base in the CPI-Ewhich measures inflation for Americans age 62 and older, rather than CPI-Wwhich measures inflation between urban wage earners and clerical workers.

“This year represents another missed opportunity to give seniors the financial relief they deserve by changing the COLA calculation from CPI-W to CPI-E, which would better reflect the changing costs of seniors,” the director TSCL executive Shannon Benton. said in a press release.

Is COLA enough?

TSCL estimated that the average Social Security check will increase by $48 from $1,920 to $1,968. That may not be enough, says AARP CEO Jo Ann Jenkins.

“Even with this adjustment, we know that many older Americans who rely on Social Security may struggle to pay their bills,” Jenkins said in a press release. “Social Security is the primary source of income for 40% of older Americans.”

Related: Are you really on track to retire well? A financial expert reveals critical milestones to hit at every age — Plus 3 common oversights.



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