The latest estimate for the 2025 Social Security COLA increase is 2.6%.
This adjustment will impact Social Security beneficiaries, SSI recipients, federal retirees, and disabled veterans, with payments beginning on January 1, 2025.
Our recent prediction for the 2025 COLA has been slightly reduced due to a lower-than-expected July 2024 CPI report, indicating a continued easing of inflationary pressures in the U.S. economy.
If the trend of slowing inflation persists, the Cost of Living Adjustment (COLA) for 2025 could be lower than the current 2.6% projection.
Table of Contents
Summary of Key Points
- 2025 COLA Estimate: Brian Reese the VA Claims Insider estimates a 2025 Social Security Cost of Living Adjustment (COLA) increase of 2.6%.
- Effective Dates: This adjustment will take effect on December 1, 2024, with payments beginning on January 1, 2025, ensuring beneficiaries receive increased amounts from the start of the new year.
- Impact of Inflation: The 2025 COLA estimate has been slightly lowered following a lower-than-expected July 2024 Consumer Price Index (CPI) report, which suggests that inflationary pressures continue to ease.
- Future Projections: If the trend of slowing inflation persists, the final COLA for 2025 could be lower than the current projection of 2.6%, affecting the overall increase in benefits for recipients.
What are the Experts Saying About the Social Security Increase 2025?
Brian Reese, The VA Claims Insider
Brian Reese, VA disability expert and founder of VA Claims Insider, estimates a 2.6% COLA for 2025.
However, he notes that if inflation continues to slow, the Cost of Living Adjustment (COLA) for 2025 could be even lower than his current projection of 2.6%.
Mary Johnson, The Senior Citizens League
Mary Johnson, a policy analyst from The Senior Citizens League, notes that the projected 2.6% COLA for 2025 is slightly lower than previous estimates, influenced by recent inflation data.
Alex Moore, Blacksmith Professional Services
“The 2025 COLA prediction is now approximately 2.57%, a slight decrease from last month’s estimate of 2.63%,” says Alex Moore, a statistician with The Senior Citizens League (TSCL) and managing partner at Blacksmith Professional Services.
What is a Cost of Living Adjustment (COLA)?
A Cost-Of-Living Adjustment (COLA) is calculated automatically each year and is intended to reflect the change in the cost of living over a one-year period.
The primary purpose of a COLA increase is to help consumers maintain their spending power relative to inflation.
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is updated monthly by the Bureau of Labor Statistics (BLS), is the measure used to calculate whether there will be a COLA increase.
The CPI-W is an estimate of the average change in prices of the goods and services purchased by households whose incomes come primarily from clerical or wage occupations.
The BLS measures the price change of each item in a “basket” of goods that the average person purchases, and then it computes overall inflation (weights each of those price changes by the item’s share of spending).
COLA 2025: What Determines the 2025 SSA COLA?
The 2025 Social Security COLA is based on the percentage increase from the highest third quarter average CPI-W recorded from 2023 compared to the average CPI-W for the third quarter of the current year (3rd quarter 2024).
The percentage increase is rounded to the nearest one-tenth of 1% (0.1%).
If the CPI-W triggers a 2025 VA disability COLA this year, it becomes effective December 1, 2024, and is payable starting January 1, 2025.
In some years; however, the CPI-W does not increase.
Sometimes a decrease has been recorded (e.g., 2010, 2011, and 2016).
In those years, no COLA was payable as required by law, which means the increase was zero.
The COLA can never be negative even during times of a decreasing price index.
What is the Projected COLA Increase for 2025?
The latest 2025 COLA estimate is 2.6%, but with inflation slowing faster than expected, the final adjustment could be even lower.
In mid-October 2024, the Social Security Administration (SSA) will announce the 2025 Cost of Living Adjustment.
If inflationary pressures continue to ease in the U.S. economy, it’s possible that the 2025 COLA will be less than 2.6%.
We won’t know for sure until the third quarter of this year (2024).
Can There Be No SSA COLA Increase?
Yes, there can be no SSA COLA increase.
Since automatic Social Security Benefit COLA’s began in 1975, there have been three years where no COLA was payable: 2010, 2011, and 2016.
The Social Security Act specifies that a COLA is payable automatically if the average CPI-W for the third quarter of the current year is higher than the highest average CPI-W for the third quarter of past years, which is called the “cost-of-living computation quarter.”
If the average CPI-W for the third quarter of the current year is equal to or less than the average CPI-W for the cost-of-living computation quarter, no COLA is payable.
What Programs Are Impacted By The 2025 COLA Increase?
Cost-of-Living Adjustments (COLA) impact a range of programs, primarily those that provide income or benefits to individuals.
The aim of COLA is to ensure that the purchasing power of recipients does not erode over time due to inflation.
Here are some key government programs impacted by COLA:
- Social Security Benefits: One of the most well-known applications of COLA. Social Security payments are adjusted annually to reflect cost of living increases.
- Supplemental Security Income (SSI): SSI benefits, which provide financial assistance to individuals who are disabled, aged, or blind, are also subject to annual COLA increases.
- Federal Civil Service Pensions: Similar to Social Security, federal pensions often include COLA provisions to protect retirees’ purchasing power.
- Military Retirement Pay: Military retirees receive COLA adjustments to their retirement pay to help keep up with inflation.
- Veterans Benefits: Various veteran benefits, including disability compensation, pension, and special monthly compensation payments, receive annual COLA adjustments.
- Federal and State Minimum Wage: Some jurisdictions automatically adjust their minimum wage levels based on inflation, which is a form of COLA. However, this is not uniform across all states or at the federal level.
- Food Stamps (SNAP Benefits): The maximum benefit amounts and income eligibility thresholds for the Supplemental Nutrition Assistance Program (SNAP) are adjusted annually for inflation.
- Medicare: Parts of Medicare, such as Part B premiums, are sometimes adjusted based on costs, which can be influenced by inflation, although this is not a direct COLA in the same way it is applied to Social Security benefits.
- Railroad Retirement Benefits: Similar to Social Security, these benefits include a COLA.
- Long-Term Disability Benefits: Some long-term disability insurance policies include COLA provisions to ensure benefits keep pace with inflation.
- Federal Employees’ Compensation Act (FECA) Benefits: COLA adjustments may also apply to benefits provided under FECA, which covers federal employees who are injured or become ill due to their job.
Recent Social Security COLA’s Since 2020
2020: 1.6%
2021: 1.3%
2022: 5.9%
2023: 8.7%
2024: 3.2%
2025: 2.6% (estimated)
Historical COLA Increases Since 1975
The chart below shows historical COLA increases since 1975:
| Year | COLA % | Year | COLA % |
|---|---|---|---|
| 1975 | 8% | 2001 | 3.5% |
| 1976 | 6.4% | 2002 | 2.6% |
| 1977 | 5.9% | 2003 | 1.4% |
| 1978 | 6.5% | 2004 | 2.1% |
| 1979 | 9.9% | 2005 | 2.7% |
| 1980 | 14.3% | 2006 | 4.1% |
| 1981 | 11.2% | 2007 | 3.3% |
| 1982 | 7.4% | 2008 | 2.3% |
| 1984 | 3.5% | 2009 | 5.8% |
| 1985 | 3.5% | 2010 | 0% |
| 1986 | 3.1% | 2011 | 0% |
| 1987 | 1.3% | 2012 | 3.6% |
| 1988 | 4.2% | 2013 | 1.7% |
| 1989 | 4% | 2014 | 1.5% |
| 1990 | 4.7% | 2015 | 1.7% |
| 1991 | 5.4% | 2016 | 0% |
| 1992 | 3.7% | 2017 | 0.3% |
| 1993 | 3% | 2018 | 2% |
| 1994 | 2.6% | 2019 | 2.8% |
| 1995 | 2.8% | 2020 | 1.6% |
| 1996 | 2.6% | 2021 | 1.3% |
| 1997 | 2.9% | 2022 | 5.9% |
| 1998 | 2.1% | 2023 | 8.7% |
| 1999 | 1.3% | 2024 | 3.2% |
| 2000 | 2.5% | 2025 | 2.6% (estimated) |
Source: SSA Cost-Of-Living Adjustments since 1975
About the Author
Brian Reese
Brian Reese is a world-renowned VA disability benefits expert and the #1 bestselling author of VA Claim Secrets and You Deserve It. Motivated by his own frustration with the VA claim process, Brian founded VA Claims Insider to help disabled veterans secure their VA disability compensation faster, regardless of their past struggles with the VA. Since 2013, he has positively impacted the lives of over 10 million military, veterans, and their families.
A former active-duty Air Force officer, Brian has extensive experience leading diverse teams in challenging international environments, including a combat tour in Afghanistan in 2011 supporting Operation ENDURING FREEDOM.
Brian is a Distinguished Graduate of Management from the United States Air Force Academy and earned his MBA from Oklahoma State University’s Spears School of Business, where he was a National Honor Scholar, ranking in the top 1% of his class.
