As October approaches, millions of Social Security beneficiaries, particularly retirees, are eagerly awaiting confirmation of the 2025 Cost-of-Living Adjustment (COLA). Unfortunately, this increase is anticipated to fall short of expectations, potentially marking a historic disappointment for many Americans. For most retirees, Social Security benefits represent more than just a financial cushion; they are essential for daily survival. Without these benefits, many individuals aged 62 and older would struggle to meet their basic needs, highlighting the program’s critical role as a source of income.
To gauge the significance of Social Security payments, Gallup has conducted surveys of retirees for the past 23 years. According to their findings, 80% to 90% of retirees rely on their monthly Social Security income to cover at least a portion of their living expenses. Notably, only 11% of respondents in Gallup’s 2024 study indicated that they do not rely on their Social Security payments.
Expected Announcement of Social Security Check Increase
The annual announcement of the COLA, set for October 10, is crucial for the 86% of Social Security beneficiaries aged 62 and older. While the 2025 COLA is projected to be modest, there are concerns that it may not meet expectations. Ideally, the cost of goods and services would remain stable, ensuring that wages and Social Security payments keep pace with inflation. However, in reality, prices fluctuate, and maintaining the purchasing power of benefits is a primary goal of Social Security’s COLA.
Before 1975, cost-of-living adjustments were assigned arbitrarily by special congressional sessions. Between the 1940s and 1974, Congress authorized 11 COLAs. Since 1975, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) has been used to calculate annual COLAs. The CPI-W, published monthly by the U.S. Bureau of Labor Statistics, includes various primary spending categories and subcategories, each with its own percentage weighting.
The CPI-W facilitates easy annual comparisons due to its consistent weighting. The COLA is calculated using the trailing 12-month figures from the third quarter, allowing for straightforward comparisons between years. If the average CPI-W reading for the third quarter of this year exceeds that of the previous year, inflation has occurred, and Social Security beneficiaries can expect an increase in their benefits for the following year. This increase is determined by the percentage change in the CPI-W reading from the previous year.
Modest Expected Increase in Social Security Benefits
Over the past 15 years, Social Security COLAs have been relatively minor, with two-thirds of adjustments being 2% or less. This period includes the lowest COLA on record (0.3% in 2017) and three years without a COLA (2010, 2011, and 2016). Deflation, which occurs when prices fall year over year, results in no COLA being applied. Recent years have seen higher COLAs, including increases of 5.9%, 8.7%, and 3.2% in 2022, 2023, and 2024, respectively. The 8.7% COLA in 2023 was the largest year-over-year percentage increase since 1982.
The Senior Citizens League (TSCL), a nonpartisan organization advocating for senior issues, forecasts a 2.63% COLA for 2025, rounded down to 2.6%. This would mark the first time in 28 years that four consecutive COLAs have been at least 2.6%, aligning with the two-decade average of 2.6%. Mary Johnson, a TSCL retiree and expert on Social Security and Medicare policy, anticipates a slightly higher 2.7% COLA for 2025. The last instance of beneficiaries receiving a Social Security check increase of at least 2.7% for four consecutive years was 32 years ago.