For most retirees, Social Security is an indispensable source of income. In each of the last 23 years, Gallup has polled retirees to gauge their reliance on this crucial social program. Consistently, 80% to 90% of retirees have proclaimed their Social Security check to be a "major" or "minor" income source.
Considering how important Social Security income is to the financial foundation of retirees, it's no surprise that the annual cost-of-living adjustment (COLA) is the most anticipated of all announcements. A fourth consecutive year of an above-average COLA means the program's more than 68 million beneficiaries will receive a bigger check in the new year.
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What is Social Security's COLA, and why does it matter?
Social Security's cost-of-living adjustment is the tool the Social Security Administration (SSA) relies on to adjust benefits for inflation most years.
Hypothetically speaking, if the cost for a broad basket of goods and services that seniors regularly buy increases by 3%, Social Security checks should also rise by 3% to ensure no loss of purchasing power. COLA is the mechanism that takes these price changes into account and adjusts benefits accordingly.
Beginning in 1975, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) became the inflationary measure used to calculate COLAs on an annual basis. The CPI-W has more than 200 different spending categories, each of which have their own respective weightings. It's these weightings that allow the CPI-W to be whittled down to a single figure at the end of each month, which allows for simple year-over-year comparisons to determine whether prices are, collectively, rising (inflation) or falling (deflation).
Although the CPI-W is reported monthly, only readings from the third quarter (July through September) factor into the calculation. If the average third-quarter CPI-W reading in the current year is higher than the comparable period of the previous year, inflation has occurred, and benefits are set to climb. The amount benefit checks rise is simply the percentage increase in average third-quarter CPI-W from one year to the next, rounded to the nearest tenth of a percent.
For 2025, Social Security beneficiaries will receive a 2.5% COLA. While this represents the smallest COLA since 2021, it's still the fourth straight year of an above-average increase -- 2.5% in 2025 versus approximately 2.3%, on average, over the prior 15 years.
An uptick in the prevailing rate of inflation has resulted in four consecutive above-average COLAs. US Inflation Rate data by YCharts.
Here's how much the average beneficiary will receive each month in 2025
However, there's a big difference between throwing out a percentage and dialing into what a 2.5% cost-of-living adjustment actually means in dollar terms for the typical Social Security recipient. Let's take a closer look at what the average monthly Social Security check will look like in 2025.
Before going any further, understand that the SSA hasn't announced what the average benefit will be for its 68 million-plus beneficiaries. This means I'll be making some calculations (which I'll walk you through) to determine how much the average beneficiary is going to receive.
Something important to note is that average Social Security benefits aren't static throughout the course of a year because new beneficiaries are added every month. With inflation lifting nominal wages and salaries over time, these new beneficiaries have a tendency to slightly increase the average monthly payout.
Based on Social Security's "Monthly Statistical Snapshot" data, the average Social Security check grew from $1,767.03 in December 2023 -- December is the month the SSA's Snapshot recognizes annual COLAs in its data releases -- to $1,788.12 in November 2024. This works out to a $21.09 organic increase in payouts over 11 months, or $1.92 per month.
If this organic increase remains consistent at $1.92, the average payout for 68.4 million beneficiaries will rise to $1,790.04 before the 2025 COLA is taken into account. Inclusive of the announced 2.5% COLA, the average monthly Social Security check will climb to $1,834.79 to enter the new year, representing an estimated increase of $44.75 per month. On an annual basis, the average beneficiary should bring home a shade over $22,000 from America's leading retirement program in 2025.
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How much will the average retired worker, worker with disabilities, and survivor beneficiary receive in 2025?
But the thing worth noting about Social Security is there are wide variances in average monthly payouts among its major categories: retired workers, workers with disabilities, and survivors of deceased workers. Let's also briefly examine how Social Security's 2025 COLA will impact the average check for these three groups of beneficiaries.
This program was created, first and foremost, to provide a financial foundation for those who could no longer do so for themselves. Retired workers account for 75.6% of all beneficiaries, and received 81.4% of the benefits that were doled out in November.
Based on estimates from the 2025 Fact Sheet released by the SSA, retired-worker benefits are expected to climb by $49 per month to $1,976 in 2025. This works out to $23,712 in forecast annual payouts for the typical retired worker.
The roughly 7.24 million workers with disabilities currently receiving benefits will see their monthly check increase by 2.5% as well in the new year. The SSA's Fact Sheet is forecasting a $38-per-month jump from $1,542 to $1,580 in 2025.
Lastly, 5.8 million survivors of workers who've passed away are in line to receive the 2.5% COLA next year. Though the SSA didn't include this group in its Fact Sheet, the estimated increase in monthly payout (calculated by me) also equates to approximately $38. In short, the average survivor beneficiary can expect their monthly Social Security check to jump from $1,513 to an estimated $1,551.
