Nearlyl 52 million retired workers received a Social Security check in October 2024, and the vast majority of those people depend on monthly benefits to make ends meet. Indeed, 88% of retirees consider Social Security an important source of income, according to Gallup

Somewhat surprisingly, two-thirds of adults surveyed by Nationwide Retirement Institute answered incorrectly when asked if Social Security was protected against inflation. Fortunately, the answer is yes. Retirees and other recipients get annual cost-of-living adjustments (COLAs) that keep benefits aligned with rising prices across the economy.

That change is a particularly big deal in 2025 because Americans have listed inflation as their most pressing financial concern for three straight years, according to Gallup. Read on to learn more about Social Security’s 2025 COLA.

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How Social Security’s annual COLAs are calculated

The Consumer Price Index (CPI) measures inflation based on how prices change over time across eight major spending groups: food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services.

The Social Security Administration calculates annual cost-of-living adjustments (COLAs) using a subset of that index known as the CPI-W. Specifically, the third-quarter CPI-W from the current year (i.e., the average reading from July to September) is divided by the same number from the previous year. The percent increase becomes the COLA in the following year.

Without regular COLAs, Social Security benefits would rapidly lose purchasing power. For instance, the CPI-W has increased 32.6% over the last decade. That means a market basket of goods and services (weighted based on normal spending patterns) is about 33% more expensive today versus 2014. Fortunately, COLAs have increased Social Security benefits by approximately the same amount since then.

Social Security benefits will get a 2.5% COLA in 2025

Social Security benefits will receive a 2.5% COLA in 2025. Retirees and other recipients will receive a COLA notice by mail in December detailing their updated benefit amount for next year. Alternatively, individuals that opted to receive communications online can find their COLA notice in the Message Center of their my Social Security account portal.

The chart below explains how the 2.5% COLA in 2025 will impact the average monthly benefit payment for different types of Social Security beneficiaries.

Data source: Social Security Administration . Note: Benefit amounts have been rounded to the nearest dollar. The average benefit (before COLA) is based on payments made in October 2024.

Importantly, inflation has cooled substantially since peaking in 2022. That trend has resulted in smaller and smaller COLAs in each subsequent year, such that the 2.5% raise coming in 2025 will be the smallest increase in benefits since 2021. That may sound like terrible news for retired workers, but there is an important silver lining.

Social Security’s COLAs essentially reimburse recipients for the purchasing power benefits lost in the previous year, which means retirees are always behind the curve to some degree. But cooling inflation means they won’t be as far behind the curve next year. Put differently, Social Security benefits won’t lose buying power as quickly next year, so long as inflation continues trending lower.

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