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What does the Cost of Living Adjustment (COLA) mean for Social Security benefits for some 68 million people across the United States? How much have benefits rose compared to 2024? How much will you get?
COLA is a scheme that aims to offset the impact of inflation by having the welfare state increase in line with the Customer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which predicts the costs of daily goods.
The Bureau of Labor Statistics then gathers data based on this throughout three quarters of the financial year to predict how inflation has fluctuated. They then recommend a COLA, which is then set by the Social Security Administration.
This COLA change can cause a rise or fall in benefits depending on how inflation has grown or shrunk compared to the previous year. For example, the record high was at 14.3% in 1980. By 1983, the COLA had fallen to 3.5%.
For 2025, the adjustment is set at 2.5% and will begin in January. That means if someone, at zero percent inflation, is due to get $10,000-per-year then they will also receive an extra $250 on top of that.
This change will carry an impact through into Medicare, Medicaid, Social Security, Supplemental Security Income and other benefits systems such as the Supplemental Nutrition Assistance Program (SNAP).
Check online or with the Social Security Administration to see which, if any, of your benefits are due to change.
Has COLA risen or fallen for 2025?
The COLA has actually decreased from 2024, when it was set at 3.2%. Whilst this may seem disappointing for Americans who will see less money in their banks in 2025, it's actually good news overall.
A decline in COLA indicates inflation is actually shrinking, thus meaning prices should be returning to what they were before inflation spiked for the 2019 Covid-19 pandemic and Russian invasion of Ukraine, in theory.
Someone who earned $10,000 in 2024 would have received an extra $320 from COLA. That means from 2024-2025, that has fallen by $70 across the year.