Social Security payments are expected to see an increase next year, though the exact percentage will only be confirmed later this fall. Since 1975, monthly benefits have included a cost-of-living adjustment (COLA), designed to help maintain purchasing power by adjusting payments according to inflation. However, the annual increase is not guaranteed and varies based on inflation trends. For example, in 2024, benefits rose by 3.2%, while in 2021, the increase was 5.9%. The most significant recent adjustment occurred in 2023, with an 8.7% increase due to inflationary pressures from the pandemic recovery. However, there have been years, such as 2009, 2010, and 2015, when no COLA was applied due to minimal inflation.
What We Know About the Next Social Security COLA Increase
The next cost-of-living adjustment is expected to be announced in October 2024, though the exact date has not been finalized. Historically, these announcements have occurred around mid-October. The COLA is determined using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is based on data collected by the Bureau of Labor Statistics. This data reflects the spending patterns of American workers and tracks price changes across approximately 80,000 products.
The COLA calculation compares the average CPI-W from the third quarter of the current year to that of the previous year. If the index shows an increase, the COLA is adjusted by rounding the percentage change to the nearest one-tenth of one percent. However, there have been years without a COLA, such as in 2016, when no adjustment was made because there was no significant change in the inflation index between the third quarters of 2014 and 2015.
Who Will Receive the Next Social Security COLA in 2025?
According to Social Security Administration (SSA) guidelines, all Social Security beneficiaries, including those receiving retirement, survivor, disability, and Supplemental Security Income (SSI) benefits, are eligible for the annual COLA adjustment. The following programs are covered:
- Retirement Benefits: This includes Social Security benefits for retirees and their spouses, based on their partner’s income.
- Survivor Benefits: Provided to family members of deceased workers.
- Social Security Disability Insurance (SSDI): Benefits for disabled workers and their families.
- Supplemental Security Income (SSI): Benefits for low-income individuals who are elderly, blind, or disabled.
Beneficiaries can expect their payments to increase in December, with the new amounts reflected in checks issued in January 2025.
Potential Impact of a 2.63% COLA Increase
If the projected 2.63% COLA is enacted, Social Security checks will increase across the board starting in January 2025. However, this percentage is currently an estimate, and the official figure could change by the end of the year.
Here’s an estimate of how the 2.63% COLA might impact average Social Security payments:
| Type of Benefit | Current Average | Post-COLA Increase |
|---|---|---|
| Average Retirement Benefit | $1,900 | $1,950 |
| Age 62 | $2,710 | $2,781 |
| Age 67 | $3,822 | $3,923 |
| Age 70 | $4,873 | $5,001 |
If the increase remains between 2.6% and 2.9%, it will be the smallest since the 1.3% adjustment in 2021. This lower adjustment reflects a slowdown in inflation and indicates that while prices are rising more slowly, beneficiaries will see a smaller boost in their payments compared to recent years.
FAQs:
When will the next COLA be announced?
The official COLA for 2025 is expected to be announced in October 2024.
How is the COLA calculated?
The COLA is based on the CPI-W, which measures the average change in prices paid by urban wage earners and clerical workers.
Will all Social Security beneficiaries receive the COLA?
Yes, all beneficiaries, including those receiving retirement, survivor, disability, and SSI benefits, are eligible for the COLA adjustment.