The 2025 COLA of 2.5% is a direct response to inflation over the past year. While the 2023 adjustment of 8.7% was one of the largest increases in decades, it was driven by the surging inflation following the pandemic and economic disruptions. The 2024 adjustment of 3.2% and the upcoming 2025 increase of 2.5% indicate an expectation of a stabilization of inflation rates, but they also underscore the variability of Social Security adjustments from year to year.
With the 2.5% COLA, the average Social Security retirement payment will increase by $49 per month, making a difference for those who rely heavily on these payments for basic needs. However, this raise is still limited in its capacity to address rising healthcare costs and other living expenses that disproportionately impact retirees. As a result, retirees must consider other sources of income to fill the gaps in their retirement plans.