In 2025, Social Security beneficiaries received a Cost-of-Living Adjustment (COLA) designed to help benefits keep pace with inflation. The COLA is an automatic annual increase that the Social Security Administration (SSA) applies to Social Security and Supplemental Security Income (SSI) payments based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). For 2025, the COLA was 2.5%, a modest increase compared with recent years but still important for Americans relying on fixed incomes. It is intended to help offset rising costs for essentials like food, housing, utilities, and healthcare.
The 2025 cost-of-living adjustment applies to tens of millions of Americans. Social Security retirement beneficiaries, disabled workers, survivors, and other eligible individuals receive the increase automatically — most will see their new benefit amounts beginning in January 2025. SSI recipients receive the COLA increase in the December 2024 payment that corresponds to January 2025 benefits. The SSA mails individualized notices to recipients in December so that beneficiaries know how much their monthly benefits will rise.
Under the 2025 COLA, average payments for many beneficiaries rose modestly. According to SSA figures, the 2.5% increase lifted the estimated average monthly Social Security retirement benefit by about $50, bringing average payments closer to $1,976 per month for retired workers at the start of 2025. SSI federal payment levels for low-income beneficiaries also rose, with individual SSI benefits increasing from previous levels to around $967 per month. Because the adjustment is a percentage, beneficiaries with higher monthly benefits saw larger absolute increases, while those with smaller benefits saw smaller dollar gains.
COLAs are crucial for helping beneficiaries maintain purchasing power in the face of inflation. Since many Social Security recipients depend on these benefits as their primary source of income, even a modest increase can help pay for necessities. Retirees often use Social Security to cover day-to-day living expenses such as groceries, housing costs, and medical care, which tend to rise over time. However, because healthcare, rent, and other key expenses sometimes rise faster than COLAs, many beneficiaries still face financial challenges despite these adjustments. Planning ahead — by reviewing household budgets and adjusting spending habits — remains an important part of making benefits stretch.
While the question refers to 2025’s COLA of 2.5%, the SSA announced that the 2026 COLA will be 2.8%, slightly higher as inflation remains persistent. This 2026 adjustment is scheduled to take effect with benefits payable in January 2026, and SSI increases begin with the December 31, 2025 payment. For 2026, the average retired worker’s benefit is expected to rise by about $56 per month, according to SSA projections, bringing the average from approximately $2,015 to about $2,071. These adjustments do not require any action by recipients — they are applied automatically.
Beneficiaries should know a few practical points about COLA and their benefits. First, the updated amounts are automatic and appear in monthly payments without needing extra forms or applications. Notices detailing the new benefit are typically mailed or posted to “my Social Security” accounts in late November or early December. It’s important for recipients to review these notices to understand their new payments and plan accordingly. Additionally, the taxation of Social Security benefits varies by state: some states tax benefits while others do not, affecting net income after taxes. Staying informed through SSA resources and financial tools helps beneficiaries effectively manage changes and plan for financial security in retirement or disability.
