The 2025 Social Security COLA Is Official. Here’s How Much the Average Retirement Check Will Increase Next Month
The cost-of-living adjustment, one of the primary features of Social Security, ensures that monthly benefits keep pace with rising costs for groceries, medical expenses, and housing. The Social Security Administration makes a public announcement every October on the COLA for the following year.
With inflation jumping between 2021 and 2023, many retirees look forward to watching their checks increase in step with these higher prices today. In October, the Social Security Administration announced a 2.5% COLA for 2025. Here is what that means for the average retirement check starting in January.
How the COLA Is Determined for Social Security
It’s helpful to know how the Social Security Administration calculates the COLA to understand the adjustment for 2025.
The index is adjusted for the Consumer Price Index, that is inflationary measure capturing increases in the cost of goods and services like food, shelter, transportation, and medicine. Specifically, it utilizes one variant of the CPI called the CPI-W, that tracks spending patterns of urban wage earners and clerical workers.
To obtain the COLA, CPI-W from the third quarter of this year and CPI-W from the corresponding time period in the previous year will be compared. The resulting average for all quarterly gains shall serve as the base in forming the COLA. For one, critics say it is too narrow because such only bases its computation upon a single quarter and hardly accounts for retirees’ personal spendings. A better metric, the CPI-E, measures costs significantly closer to senior spending. But for now, it’s CPI-W that is standard.
What This 2.5% COLA Means for Seniors
The percentage applied means the actual increase will vary with the size of an individual’s current benefit. Updates are mailed to seniors, who will see the changes take effect with their January payment.
As of October, the average Social Security retirement benefit was $1,924. With the 2.5% adjustment, this amount will increase by $48, bringing the average monthly benefit to $1,972.
