Social Security Alert: COLA 2025

Prices accelerated in September, though the overall inflation rate continued to drift lower. The Consumer Price Index (CPI ) was up 2.4 percent from a year earlier, the smallest 12-month increase since February 2021. Although consumers complain about food costs, food at home is up 1.3 percent from a year ago, while those who dine out must absorb a 3.9 percent annual increase.

By far, the most impactful category of the report is shelter, which did show some progress, but continues to keep the core CPI elevated. Shelter is up 4.9 percent from a year ago, accounting for 65 percent of the total increase of core inflation. But there have long been complaints that the CPI report lags more timely data. According to Apartment List , rents dropped by a half of percentage point in September and are slightly cheaper than they were a year ago. The median rent nationally now stands at $1,405 and is expected to continue to dip modestly through the remainder of the year. Despite this progress, the national median rent is still more than $200 per month higher than it was just a few years ago.

There was even more attention than usual on the government’s release of the September Consumer Price Index (CPI ). While the inflation rate has been falling steadily, and did so again last month, the nation’s near 68 million Social Security recipients (retired workers and their dependents, disabled Americans and their dependents and survivors), were focused on a subcategory of the report called CPI-W, not the headline rate which is called CPI-U. The reason is that CPI-W is the basis for determining the annual Social Security Cost of Living Adjustment (COLA).

The COLA for 2025 will be 2.5 percent, down from 2024’s 3.2 percent bump and a lot lower than the 2023 COLA of 8.7 percent. But the reason is a good one: the inflation rate is decreasing. As a reminder, when prices dropped on an annual basis, like in 2010, 2011 and 2016, Social Security COLA was a big fat ZERO. As a frame of reference, even with the post-COVID inflation spike, over the last decade the COLA increase has averaged about 2.6 percent.

With the 2025 COLA announcement, the average Social Security check for individual retirees will increase from $1,927 per month to $1,976, providing an average $49 monthly boost. Hopefully, as the inflation rate retreats towards the Federal Reserve’s desired target of 2 percent, SS recipients will be able to pocket the difference throughout the year.

The annual SS COLA is yet another reason to wait to claim your Social Security benefit to at least your Full Retirement Age (66-67, depending on the year of your birth) or to age 70, when you can receive credits for delaying filing that can boost retirement savings significantly. The higher Social Security benefit, the more money that you can collect every year when the COLA is announced.