By SS 
Social Security Cost-of-Living Adjustment (COLA) benefits for more than 71 million Americans, including retirees, veterans, and dependents, receive payments from Social Security. Initial benefit calculations are made using the employee’s wage history. However, annual cost-of-living adjustments (COLA) were instituted by legislation in 1973 and started in 1975 to keep these payments from depreciating over time. Annual COLA changes are common. The Social Security COLA for 2024 was 3.2%. Today, Social Security provides a monthly income to millions of retired Americans. That represents additional income for certain individuals on top of a sizeable 401(k) or IRA. However, for some people, such benefits make up the majority of their retirement income each month. The yearly Social Security cost-of-living adjustments, or COLAs, are crucial for those in the latter group.
Related: SSA Press Release
The nonpartisan Senior Citizens League revised its 2025 Social Security COLA prediction to 2.57% based on July’s 2.9% CPI-W measurement. A 2.57% increase seems like a huge letdown in comparison to the 3.2% COLA Social Security recipients received at the beginning of 2024.
It’s also critical to understand that the 2.57% COLA estimate indicated earlier is merely an estimate. Social Security COLAs are computed using CPI-W data from the third quarter. The BLS hasn’t even released CPI figures for August as of this writing. Furthermore, as September is only getting started, it’s obvious that we lack statistics for the last month of the quarter.
As a result, the real Social Security COLA for 2025 may be greater or less than 2.57%. Furthermore, it’s premature to get fixated on that figure. It is not until the Social Security Administration releases its official COLA announcement in October that you can begin planning your finances using your anticipated 2025 monthly income.
COLA Increases Year Over Year
| Year | Increase over previous year |
|---|---|
| 2024 | 3.2% |
| 2023 | 8.7% |
| 2022 | 5.9% |
| 2021 | 1.3% |
| 2020 | 1.6% |
History of Automatic Cost-Of-Living Adjustments
The Past of Automatic Adjustments for Cost of Living
The COLA’s main goal is to prevent inflation from decreasing the purchasing power of Social Security and Supplemental Security Income (SSI) benefits. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) was used to calculate the COLA, and the percentage increase from the third quarter of the previous year to the current quarter is what counts. A COLA cannot exist in the absence of a rise.
The Department of Labor’s Bureau of Labor Statistics determines the CPI-W. It is the legal standard by which the Social Security Administration determines COLAs.
Note: The adjustment is typically announced by the Social Security Administration around the second week of October. The new rate becomes operative in January of the following year.
Though they generally agree with the official rate to some extent, keep in mind that these are estimates that are subject to change each month based on the rate of inflation from the previous month.