The most important day of the year for Social Security recipients is fast approaching. The Labor Department will publish September inflation on Thursday, Oct. 10, at 8:30 a.m. ET. With that information, the Social Security Administration will be able to calculate the cost-of-living adjustment (COLA) for 2025.
Rising prices have been a persistent issue of late. Americans have identified inflation as their most concerning financial problem for three consecutive years, and the percentage of survey participants that cited inflation hit a record high in 2024, according to Gallup.
In that context, the stakes surrounding the upcoming COLA announcement are particularly high. Here's what Social Security recipients should know about Oct. 10.
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The Social Security Administration will announce the 2025 COLA on Oct. 10
Social Security benefits receive an annual cost-of-living adjustment (COLA) to help recipients keep up with rising prices across the economy. COLAs protect the purchasing power of Social Security by ensuring benefits increase in lockstep with a subset of the Consumer Price Index known as the CPI-W.
Here's how to math works: The CPI-W from the third quarter of the current year (July through September) is divided by the CPI-W from the third quarter of the prior year, and the percent increase becomes the COLA in the subsequent year. For example, the CPI-W increased 3.2% in the third quarter of 2023, so Social Security benefits increased 3.2% in 2024.
The Labor Department will publish September CPI-W data on Oct. 10, at 8:30 AM ET. That will be the final piece of information needed to calculate the 2025 COLA. Retirees should expect a press release concerning the COLA from the Social Security Administration that same day.
Social Security benefits are projected to increase 2.6% in 2025
In August, The Senior Citizens League (TSCL), a nonprofit advocacy group, issued a downward revision to its COLA forecast. "The 2025 COLA prediction is about 2.57%, down from 2.63% last month," said Alex Moore, TSCL statistician. However, those two estimates amount to the same COLA because benefit increases are rounded to the nearest tenth of a percent.
The chart below shows how a 2.6% COLA would change the average monthly payout for different types of Social Security beneficiaries. All amounts are rounded to the nearest dollar.
|
Beneficiary Type |
Average Benefit (Before COLA) |
Average Benefit (After COLA) |
Increase |
|---|---|---|---|
|
Retired Workers |
$1,920 |
$1,970 |
$50 |
|
Spouses |
$910 |
$933 |
$23 |
|
Survivors |
$1,509 |
$1,549 |
$40 |
|
Disabled Workers |
$1,540 |
$1,580 |
$40 |
Data source: Social Security Administration. The average payout before the COLA is based on the average benefit in August 2024.
As shown above, the average retired worker would get an additional $50 per month if Social Security benefits received a 2.6% COLA in 2025. That is equivalent to an extra $600 for the full year.
In December 2024, Social Security recipients will receive a COLA notice by mail detailing their updated benefit amount for 2025. Alternatively, recipients can also find their COLA notice in the Message Center of their my Social Security account.
In closing, the projected 2.6% COLA would be the smallest raise retired workers have received since 2021. Theoretically, benefits should increase at the same pace as inflation, but inflation impacts everyone a little differently depending on how they spend money. For that reason, some retired workers may feel like their wallets are stretched especially thin next year.
In those situations, I have two recommendations. First, interest rates remain elevated, which makes high-yield savings accounts and certificates of deposit look attractive. Social Security beneficiaries worried about their finances should consider putting money into one or both of those vehicles today.
Second, gig work platforms life Fiverr and Upwork, as well as DoorDash, Instacart, Lyft, and Uber, make it relatively easy to earn additional income. Social Security beneficiaries struggling to make ends meet should consider part-time work if possible. A little extra money could go a long way.
