The cost of living in the United States—including almost every essential good and service—has increased within the past few years. Retirees are naturally concerned about this rise in cost as many of them rely on social security as their form of income.
The cost of living adjustment, or COLA, is meant to help mitigate the effects of rising costs for seniors, but retirees and financial experts mostly agree that the system is flawed and does not do enough to protect our seniors. Let’s take a look at what the social security COLA will be for 2025 and how this compares the past five years.
Social Security COLA Increase 2025
The Social Security COLA for 2025 is projected to be a 2.5% increase, which is meant to help seniors with the rise in cost of living. However, the question on many seniors’ minds is “Will it be enough?”.
The 2025 COLA increase is actually one of the smallest increases for seniors in the past few years, despite costs having risen significantly with unprecedented inflation.
Most notably, the housing and healthcare costs have skyrocketed and are only projected to continue to increase, so the COLA raise will not be enough to cover many American seniors. Many remain concerned about social security insolvency as well.
COLA Increases Over the Past Few Years
Between 2020 and 2024, the social security COLA increase has changed with inflation and the economy as a whole.
In 2020 and 2021 the COLA increase was 1.6% and 1.3%, but it jumped to 5.9% and then 8.7% in 2022 and 2023. Of course, the COVID pandemic played a large role in the economy and thus the COLA increase for those years. Most recently, in 2024 the increase was 3.2%.
So although the cost of essential goods and services has only gone up since then, the COLA increase is projected to be even less than that for 2024. This has given way to panic among retirees who wonder how they will afford things.
How are Social Security COLA Increases Decided?
Each year, the Senior Citizens League decides what the COLA raise will be based off of Consumer Price Index (CPI) data. They examine the data from the third quarter of the previous year to the third quarter of the current year and then make a projection that attempts to match inflation rates, average prices of consumer goods, etc.
The social security administration has been under scrutiny for the past few years as seniors grow more and more frustrated with the COLA increases not matching the cost of living. With so many retirees relying on their social security checks as their income, COLA increases are vital in establishing their financial stability in the later years of their lives.
