The Social Security Administration (SSA) has announced a 2.5% cost-of-living adjustment (COLA) for 2025, translating into an average monthly increase of $48 for beneficiaries. This adjustment will affect nearly 68 million recipients starting in January 2025, with Supplemental Security Income (SSI) payments increasing a day earlier on December 31, 2024, for around 7.5 million individuals.
This 2.5% increase is the smallest COLA adjustment since 2021, falling below the 3.2% bump provided in 2024. Over the last decade, COLA increases have averaged 2.6%. The SSA bases these adjustments on inflation trends observed between July and September, and this year’s historically low inflation played a significant role. In July 2023, inflation was 2.9%, dropping to 2.5% in August and 2.4% by September—the lowest levels seen in three years. The Federal Reserve responded by lowering interest rates for the first time in four years, impacting credit card rates, mortgages, and loans.
Advocacy Groups Call for COLA Calculation Reform
The SSA currently uses the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to calculate COLA adjustments, but some advocacy organizations argue that this method does not accurately reflect the needs of older Americans. Groups like The Senior Citizens League (TSCL) are advocating for a shift to the Consumer Price Index for the Elderly (CPI-E), which would account more closely for expenses such as healthcare, which disproportionately affect seniors.
“This year is another missed opportunity to provide seniors with financial relief,” said Shannon Benton, Executive Director of TSCL. “Switching to the CPI-E would better capture the changing expenses seniors face.”
Even with the 2.5% increase, some experts worry it won’t be enough to meet the rising costs faced by older Americans. Jo Ann Jenkins, CEO of AARP, stressed the growing financial challenges: “Many older Americans depend on Social Security as their primary income, and it’s increasingly difficult for them to cover essentials with these modest increases.”
With the average Social Security check increasing from $1,920 to $1,968, the pressure on retirees relying solely on these benefits continues. As inflation fluctuates and financial priorities shift, calls for a more accurate COLA calculation may gain further traction in the coming years.
