Social Security payments will rise for eligible Americans – Here’s when it will begin

As the Cost-of-Living Adjustment (COLA) for 2025 Social Security benefits remains unannounced, many beneficiaries are eagerly awaiting news about how their benefits will increase to keep pace with inflation. The annual COLA is designed to ensure that Social Security payments retain their purchasing power amid rising living costs.

However, despite yearly COLA adjustments, The Senior Citizens League (SCL) has reported a 20% decline in the purchasing power of benefits since 2010. With projections lower than expected for 2025, there’s growing interest in what this year’s adjustment will bring.

COLA

The official COLA for 2025 will be announced on October 10, 2024. Projections suggest the COLA will be around 2.5%, a decrease from the 3.2% adjustment in 2024. If this projection holds true, it would represent the lowest COLA since the 2020 pandemic. To put this into perspective, a 2.5% increase on a $2,000 monthly benefit would result in a new benefit amount of roughly $2,050.

Though beneficiaries might be disappointed with the lower figure, it reflects a stabilizing economy. This follows record-breaking adjustments like the 8.7% increase in 2022, which was driven by the severe economic effects of the COVID-19 pandemic. Historically, the highest COLA increase occurred in 1980, at 14.3%, when inflation was rampant.

Important Dates

While the COLA announcement is key, there are other important dates for beneficiaries to remember:

• Early December 2024: The Social Security Administration (SSA) will send personal notices to all beneficiaries, detailing their exact benefit increase for 2025. While you can estimate your new benefits after the October announcement, the December notice will confirm the precise amount.
• January 8, 2025: The first batch of Social Security checks with the new COLA-adjusted amounts will be sent to beneficiaries born between the 1st and 10th of any month.
• January 15, 2025: Beneficiaries born between the 11th and 20th will receive their first payment with the increase.
• January 22, 2025: Those born between the 21st and 31st will see their first increase reflected in this payment.

Higher COLA

While a higher COLA might seem advantageous because it results in larger benefit checks, it’s not necessarily a sign of economic health. The size of the COLA is directly tied to inflation, meaning that when COLA is high, the cost of living is rising sharply, often indicating economic struggles.

The projected lower COLA of 2.5% for 2025 suggests that inflation may be slowing and the economy stabilizing after the pandemic and global challenges like the war in Ukraine, which has driven up gas and energy prices. However, inflation is unpredictable, and the global socio-economic landscape could shift rapidly, affecting prices and future COLA adjustments.

CPI-W

A major concern for beneficiaries is how COLA is calculated. The SSA bases COLA adjustments on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures the spending habits of working individuals. Social Security beneficiaries, primarily retirees, typically spend more on healthcare and housing—expenses that aren’t fully captured in the CPI-W.

Because the CPI-W focuses on younger wage earners’ spending patterns, it may not fully account for the higher costs that retirees face in areas like medical care and housing. As a result, the COLA may be lower than necessary to offset the actual rising costs that seniors encounter, leaving many with less purchasing power.

The 2025 Social Security COLA adjustment is set to be announced in October, with projections suggesting a modest 2.5% increase. While this is lower than expected, it reflects a stabilizing economy, which is good news for long-term economic recovery. However, many beneficiaries continue to struggle with rising healthcare and housing costs, areas where the COLA may not fully reflect their financial reality.

Despite these challenges, the COLA remains an essential tool for adjusting benefits to match inflation, though its effectiveness is a topic of ongoing debate. Beneficiaries should mark key dates on their calendars and prepare for the adjustments in the new year.

FAQs