The 2025 Social Security cost-of-living adjustment, or COLA, went into effect recently and was reflected on the payments received in January. Each year, Social Security benefits are adjusted to keep up with inflation (if there is any), with the goal of helping seniors who receive Social Security checks to keep up with the rising costs of living.

In a recent survey, The Motley Fool asked 2,000 retirees about the 2025 Social Security COLA, which increased benefit checks of seniors by 2.5%. To put it mildly, most respondents didn’t think they received enough of a raise.

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A majority (54%) of retirees called the COLA insufficient, and only 25% thought that benefits increased by an appropriate amount. What’s more, 81% of survey respondents said that the COLA won’t help them keep up with essential living expenses. When we look at the types of inflation that impact seniors the most, it isn’t hard to see why.

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Retirees are paying more for their essential expenses

In a nutshell, certain expenses that disproportionately impact retirees have increased by more than the official inflation rate used to determine the Social Security COLA. For example, seniors spend more on housing (as a percentage of their income) than the overall population. Recent Consumer Price Index (CPI) data showed that housing costs increased by 4.6% year over year in December 2024 — and this was the smallest increase since early 2022.

Healthcare is another cost that disproportionately affects retirees. In the 12 month period ending in December, the medical-care services index (a component of the CPI report) increased by 3.4%.

Both these increases are clearly greater than the 2.5% COLA and are often the two largest expense categories affecting retirees. Plus, while food inflation has been rather tame recently, it’s been one of the biggest drivers of inflation in the U.S. in the past few years. So it isn’t a big surprise that the raise just given to retirees isn’t exactly helping the Social Security benefits of seniors keep up with rising costs.

In fact, when asked what the COLA should be to help retirees keep up with the cost of living, only 3% of survey respondents said it should be less than a 3% adjustment. More than two thirds thought the COLA should have been 6% or higher in 2025.

Retirees are feeling the squeeze of inflation

In the survey, 62% of retirees say that they’ve cut back on nonessential purchases, and 42% say they have reduced spending on necessities. Surprisingly, only 14% of retirees say they haven’t made any changes to their spending habits due to inflation.

About 7 out of 10 retirees say that the formula used to calculate the cost-of-living adjustment doesn’t do a great job reflecting the actual inflation seniors deal with. And it’s easy to see why they say that.

If you aren’t familiar, the Social Security COLA is determined by comparing the CPI in the third quarter of the current year to the same period in the previous year. But the version of CPI that’s used is the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index is designed to describe inflation as it applies to working Americans, not retirees. There’s another version, known as the Consumer Price Index for the Elderly (CPI-E), but under current law, it isn’t used for COLA purposes.

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