The upcoming cost-of-living adjustment (COLA) for Social Security in 2025 may not bring the relief many retirees are hoping for. Despite inflation showing signs of heating up again in early 2025, initial projections suggest the benefit increase could be smaller than in previous years. For the millions of Americans who rely on Social Security, this news adds to growing concerns about maintaining financial stability in retirement.
Back in 2023, Social Security recipients received a historic 8.7% boost—the largest increase in over 40 years—driven by post-pandemic inflation. Still, many retirees struggled to keep up with rising costs throughout the year. According to the Retirement Confidence Survey by the Employee Benefit Research Institute (EBRI), even with bigger checks, many seniors found it difficult to manage day-to-day expenses. It was a clear signal that inflationary pressures were far from over.
Retirees face a smaller-than-expected COLA in 2025
In 2024, Social Security benefits increased by only 3.2%, which left many feeling shortchanged. A survey conducted by The Senior Citizens League (TSCL) revealed that 71% of retirees saw their household expenses rise more than that, and 53% had already tapped into their emergency savings to stay afloat. Naturally, expectations for a larger adjustment in 2025 began to grow. But early estimates from TSCL now suggest the COLA could drop to around 2.6%, leaving many seniors bracing for further financial strain.
This smaller adjustment is tied to how COLAs are calculated. Each year, the Social Security Administration determines the increase based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) during the third quarter—July through September. If inflation during those months doesn’t rise significantly compared to the previous year, the COLA remains low, regardless of what prices are doing earlier in the year.
Inflation is rising again, but COLA may not keep up
While inflation cooled off in late 2023, recent data shows it’s climbing again. The CPI-W rose by 2.9% in January, 3.1% in February, and 3.5% in March—the sharpest monthly increase in seven months. That March reading is especially troubling since it already outpaced the 3.2% COLA applied this year, meaning many retirees lost purchasing power last month.
To put this into perspective: the average monthly Social Security benefit for a retired worker was $1,910.79 in February 2024. A 2.6% increase would raise that to $1,960.47, giving retirees about $49.68 more per month. While every bit helps, it’s clear this won’t go far in covering higher grocery bills, medical costs, or utility payments.
The official COLA won’t be finalized until mid-October, once third-quarter inflation figures are released. In the meantime, retirees are encouraged to plan cautiously, watch their spending, and prepare for the possibility that 2025’s benefit boost may not stretch very far. In times of uncertainty, smart budgeting and financial foresight remain essential tools for staying ahead.
