Social Security benefits will increase 2.5% in 2025
With inflation continuing to cool, seniors will see a small uptick in their monthly Social Security checks.
The increase in Social Security benefits next year will be pocket-size.
The Social Security Administration announced a 2.5% cost-of-living adjustment (COLA) for 2025. That’s down from 3.2% this year but in line with the 2.6% average over the past two decades.
Starting in January, the increase will add a little under $50 to the average monthly benefit of roughly $1,900, according to the SSA, providing some comfort to the more than 72 million retired senior citizens and disabled workers who have grappled with higher prices in recent years.
But millions will still struggle to make ends meet in retirement.
“The Social Security cost-of-living adjustment is essential to ensure beneficiaries’ purchasing power keeps up with inflation, even as it slows across the economy,” Jason Fichtner, chief economist at the Bipartisan Policy Center, told Yahoo Finance.
The COLA is calculated by averaging the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for July, August, and September and then comparing that figure with the same data last year. On Thursday, government data showed inflation rose 0.2% over last month and 2.4% over the prior year in September.
In general, people who receive Social Security benefits are notified by mail in early December about their new benefit amount. Most beneficiaries can also view their COLA notice online through their personal Social Security account at ssa.gov/myaccount/.
The once-a-year inflation adjustment began in 1975 under a formula made into law by Congress, helping beneficiaries shoulder increasing day-to-day living costs.
Shannon Benton, executive director of the Senior Citizens League, said her group had anticipated a “disappointing substantially lower COLA” for 2025.
Even though prices have come down, seniors are frustrated, she said.
“Our research shows that 67% of seniors depend on Social Security for more than half their income and that 62% worry their retirement income won’t even cover essentials like groceries and medical bills,” she said.
While overall inflation has cooled this year, the costs that eat up many seniors’ income such as shelter, food, and medical services continue to tower above the overall rate of inflation.
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) does not survey retired adults aged 62 and older — “the very people the Social Security COLA is supposed to protect,” Mary Johnson, a Social Security and Medicare policy analyst, told Yahoo Finance.
The CPI-W looks at the price inflation experienced by working adults younger than 62. “But younger working consumers spend their money differently than older people covered by Medicare,” Johnson said.
For example, economists estimate that younger workers spend about 7% of their budget on healthcare costs, but older adults tend to spend on average 15% or more of their incomes on healthcare, according to Johnson.
Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist, and the author of 14 books, including "In Control at 50+: How to Succeed in The New World of Work" and "Never Too Old To Get Rich." Follow her on X @kerryhannon.
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