How is the 2025 Social Security COLA calculated?
On 10 October, the increase to the Social Security COLA will be revealed. What is it, how is it calculated and what does it mean for your benefits?
Social Security beneficiaries are about to see an increase in their monthly payments thanks to the Cost-of-Living Adjustment, also known as COLA.
Year after year, the Social Security Administration (SSA) makes an increase in monthly payments to all beneficiaries through the COLA. The increase is made with the objective of matching the amount of the checks with the current inflation, in such a way that the beneficiaries do not lose purchasing power in their monthly payments when the rate inflation is high.
How is COLA calculated?
The increase to the COLA is made based on the annual increase in the Consumer Price Index for Salaried Workers in Urban Areas and Administrative Workers (CPI-W).
To determine this, SSA compares the CPI-W for the third quarter of the year - July, August and September - that is prior to the CPI-W for the third quarter of the current year. The difference between one and the other will be the equivalent of the increase in COLA. In 2024, the increase was 3.2%, mcuh smaller than the 8.7% of the year prior.
This is what Social Security payments will likely be in 2025
Taking into account that the increase to the COLA considers the CPI-W of the third quarter of the previous year compared to the current year, the announcement is always made in the month of October when the Bureau of Labor Statistics releases its inflation data.
However, a projection made by The Senior Citizens League, one of the largest nonpartisan senior groups in the United States, notes that the increase to COLA for 2024 will likely be 2.5 percent.
Once the increase is officially announced, beneficiaries will be able to see the increase reflected in their payments starting in January 2025.