If you’re one of the Americans depending on Social Security benefits, you’re probably eagerly awaiting the annual cost-of-living adjustment (COLA) announcement. these increases can make a big difference in your monthly income.
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Social Security’s History
Before 1975, there weren’t many COLAs. In fact, Congress only agreed to 11 COLAs from 1940 to 1974. But since then, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) has been used by Social Security to track inflation and make changes to payments as needed.
How does COLA Works?
So, how do COLAs actually work? Social Security looks at the last 12 months of CPI-W data from the third quarter (July to September) and calculates the percentage increase. If prices have gone up, benefits go up too.
What are the changes in 2025?
Over the past 15 years, COLAs have been pretty small – sometimes even nonexistent. But the last three years have seen some bigger increases, with 2023’s 8.7% COLA being the largest in 41 years. For 2025, estimates are a bit lower, ranging from 2.63% to 2.7%. That may not seem like a lot, but it’s still historic – we haven’t seen four consecutive years of COLAs above 2.6% in 28 years!
What You Need to Know
What can you expect your monthly check to look like in 2025? If you’re a retired worker, your average monthly payment could go up by $49.88 to $51.79. That’s a significant increase, especially considering how much many seniors rely on Social Security to make ends meet.
Conclusion
While the 2025 COLA may not be as big as some had hoped, it’s still a welcome increase. And who knows – maybe next year will bring even bigger benefits.
FAQs
What is a cost-of-living adjustment (COLA) in Social Security?
A COLA is an annual increase in Social Security benefits to keep pace with inflation and maintain purchasing power.
When will the 2025 COLA be announced?
The exact date has not been specified, but it maybe announced in October.
How much will Social Security benefits increase in 2025?
Estimates suggest a 2.63% to 2.7% increase, which would be historic if achieved for four consecutive years.
What is the average monthly Social Security benefit?
As of June, the average monthly benefit was $1,918.28, or just over $23,000 annually.
How is the COLA calculated?
Using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
How does the COLA affect different beneficiaries?
Varying increases for retired workers, disabled workers, and surviving spouses.
