Here's Exactly How the 2025 Social Security COLA Affected Retirement Benefits

Source The Motley Fool

Social Security recipients are now seeing the 2.5% cost-of-living adjustment (COLA) reflected in their monthly benefit payments. This is intended to help seniors and other Social Security recipients keep up with inflation and is based on Consumer Price Index (CPI) data from the third quarter of 2024.

While the 2.5% COLA isn't exactly news at this point, we just got our first look at how it impacted the actual payments sent to retirees. Here's a rundown of the latest Social Security Monthly Statistical Snapshot, and what the COLA means to various types of Social Security recipients.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »

How much did Social Security benefits go up in 2025?

The Social Security Administration recently released its December 2024 Monthly Statistical Snapshot. At first, it might sound like this data would be before the 2025 COLA took effect, but it's important to point out how the COLA technically works.

Social Security card in pile of money.

Image source: Getty Images.

The Social Security cost-of-living adjustment officially goes into effect in December of each year -- so technically speaking, the 2.5% adjustment was the 2024 COLA. However, Social Security benefits are paid one month in arrears, so the December benefit is the monthly payment that is physically received in January.

Without further delay, here's how much the average Social Security benefit is for different categories of retirees, compared with what they were the previous month before the COLA was included.

Type of Beneficiary

December 2024 Average (Includes COLA)

November 2024 Average (Before COLA)

Monthly Difference

Retired workers

$1,975.34

$1,925.46

$49.88

Spousal benefits

$930.60

$908.76

$21.84

Survivors benefits

$1,545.57

$1,508.29

$37.28

Disability benefits

$1,439.50

$1,404.51

$34.99

Overall average

$1,834.43

$1,788.12

$46.31

Data source: Social Security Administration, Monthly Statistical Snapshots, Nov./Dec. 2024.

So, the average Social Security retirement benefit increased by nearly $50 per month, or about $600 per year.

Is the 2025 COLA enough?

Now that we've seen the impact of the Social Security COLA on benefits, the question of whether it is enough to actually keep up with inflation or not is another matter.

As mentioned, the 2.5% adjustment came from comparing third-quarter 2024 CPI data to the CPI data from the third quarter of the previous year. However, there are several versions of the CPI, and the specific version used to compute the Social Security COLA is the CPI-W, which is the Consumer Price Index for Urban Wage Earners and Clerical Workers. As the name implies, this measures the impact of inflation on working-age Americans.

There are some types of expenses that disproportionately affect seniors. Healthcare is the most obvious, as older people tend to require healthcare services more than younger people. But there are others. Housing is a big one that isn't quite as obvious, but the reality is that the typical retiree spends more on housing as a percentage of income compared to the overall population.

There is a version of the CPI that takes these things into account, known as the CPI-E. And a recent report by the Congressional Research Service found that if the CPI-E had been used instead of the CPI-W, the COLA for this year would have been 3%, not 2.5%. And it isn't just this year -- the same report found that from January 1985 through January 2024, the CPI-E increased by a total of 23 percentage points more than the CPI-W.

The good news is that there are several legislative efforts underway to replace the CPI-W with the CPI-E in the COLA formula. Nothing is close to the finish line just yet, but it could be on the table when it comes to future Social Security reforms.

The $22,924 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.

View the "Social Security secrets" »

The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Gold Price Forecast: XAU/USD declines to near $4,450 as safe-haven demand eases Gold price (XAU/USD) declines to near $4,450 during the early Asian trading hours on Thursday. The precious metal loses momentum as traders book profits after a recent rally. Later on Thursday, the weekly US Initial Jobless Claims data will be released.
Author  FXStreet
Yesterday 01: 29
Gold price (XAU/USD) declines to near $4,450 during the early Asian trading hours on Thursday. The precious metal loses momentum as traders book profits after a recent rally. Later on Thursday, the weekly US Initial Jobless Claims data will be released.
placeholder
Bitcoin Price Slides Despite ‘Very Bullish’ MSCI Update: What Happened?MSCI's new rules limit passive investment demand for newly issued shares, impacting Bitcoin-linked companies' fundraising strategies.
Author  Mitrade
21 hours ago
MSCI's new rules limit passive investment demand for newly issued shares, impacting Bitcoin-linked companies' fundraising strategies.
placeholder
Gold selling pressure persists as traders lock in profits ahead of US NFP reportGold (XAU/USD) remains under some selling pressure for the second straight day and slides back closer to the overnight swing low during the Asian session on Thursday. The downtick lacks any fundamental catalyst and is likely to remain limited amid a supportive fundamental backdrop.
Author  FXStreet
20 hours ago
Gold (XAU/USD) remains under some selling pressure for the second straight day and slides back closer to the overnight swing low during the Asian session on Thursday. The downtick lacks any fundamental catalyst and is likely to remain limited amid a supportive fundamental backdrop.
placeholder
Silver Price Forecasts: XAG/USD extends its reversal below $76.00Silver (XAG/USD) is trading lower in an otherwise calm market session on Thursday.
Author  FXStreet
19 hours ago
Silver (XAG/USD) is trading lower in an otherwise calm market session on Thursday.
placeholder
Bitcoin briefly dips under $90,000 as profit-taking drags ETH, XRP and BNB lowerBitcoin briefly slipped below $90,000 after hitting $94,000 earlier in the week, with ETH falling to $3,120 as traders cited profit-taking, $150 million in long liquidations, and macro uncertainty including U.S. jobs data and tariff-related Supreme Court risks.
Author  Mitrade
18 hours ago
Bitcoin briefly slipped below $90,000 after hitting $94,000 earlier in the week, with ETH falling to $3,120 as traders cited profit-taking, $150 million in long liquidations, and macro uncertainty including U.S. jobs data and tariff-related Supreme Court risks.
goTop
quote