The 2025 Social Security COLA increase of 2.5% has been announced, meaning an equivalent adjustment for CSRS retirees and a flat 2.0% COLA for FERS.
2025 COLA Announced for Social Security, CSRS, and FERS
The Social Security Administration announced on October 10 that the social security recipients will see a 2.5% boost in benefits next year, as predicted last month by the Senior Citizens League. This annual cost-of-living adjustment (COLA) is crucial for maintaining the purchasing power of Social Security recipients amidst fluctuating inflation rates. This means that CSRS annuitants will see a 2.5 percent increase in their pension income as well and FERS retirees will see 2.0% increase.
The 2025 Social Security COLA Compared to Previous Years
The 2025 COLA increase of 2.5 percent is a moderate adjustment compared to recent years. In 2024, the adjustment resulted in 3.2 percent increase for Social Security retirement benefits., reflecting higher inflation rates at the time. In contrast, the increase in 2023 was the biggest in over a decade at 8.7%.. Historically, COLA adjustments have varied, with some years experiencing minimal increases due to low inflation. The 2025 increase aligns with the long-term average, providing a balanced approach to maintaining retirees’ purchasing power without overburdening the Social Security system.
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How the Cost of Living Adjustment is Determined
Under current law, the annual adjustment is determined by the Social Security Administration (SSA) using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index, published by the Bureau of Labor Statistics, measures changes in the cost of living based on the average prices paid by urban wage earners and clerical workers. The SSA compares the average CPI-W from the third quarter of the current year to the same period in the previous year to calculate the COLA. For 2025, this calculation resulted in a 2.5% increase, reflecting the inflationary trends observed in the economy.
Figuring Out the Adjustment for FERS Annuitants
As the adjustment is designed to ensure that Social Security payments keep pace with the cost of living, safeguarding the financial stability of retirees, the same goes for federal retirees receiving a FERS or CSRS pension. But while traditional CSRS annuitants do not usually receive retirement benefits from Social Security, those collecting retirement income from FERS do. This is the justification given for the FERS “diet” or “flat” COLA rule. If Social Security and CSRS get a COLA increase of 2.0% or less, then FERS gets an equivalent boost. If between 2.0 percent and 3.0 percent, FERS pensions get a flat 2.0%. If above the 3% threshold, the resulting FERS COLA is 1% less.
| 2025 | 2024 | 2023 | |
|---|---|---|---|
| Social Security/ CSRS |
2.5% | 3.2% | 8.7% |
| FERS | 2.0% | 3.0% | 7.7% |
When COLA Takes Effect for Social Security, CSRS, and FERS.
When Social Security Recipients will Receive COLA Increase for 2025
The Social Security Administration has established specific payment dates for 2025, ensuring that beneficiaries receive their adjusted benefits in a timely manner. Payments are typically issued on the second, third, and fourth Wednesdays of each month, depending on the recipient’s birth date. Starting in January of next year, recipients will see the 2.5% boost. However, if also receiving Medicare B coverage, the net amount received could be less.
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When 2025 Adjustment Begins for FERS and CSRS Pensions
Likewise, Federal retirees under the Federal Employees Retirement System (FERS) and the Civil Service Retirement System (CSRS) will also benefit from a COLA increase (see table above) and can expect to see the boost take effect when they get their January 2025 monthly disbursement from their given retirement system. This adjustment is vital for federal retirees who rely on these benefits as a significant portion of their retirement income, helping them cope with inflationary pressures. With this year’s adjustment being considerably less than 2024 and 2023, more attention might need to be paid to their financial plan and budget to stay on top of their various expenses in retirement.
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Your Financial Plan and Preparing for the 2025 COLA Increase
How will Adjustment Play a Role in Your Financial Plan?
The annual COLA is a vital component of retirement planning, as it directly affects the income that retirees can expect from Social Security and for federal retirees, their federal pension as well. Understanding the COLA and its implications allows retirees to make informed decisions about their financial future. By anticipating changes in benefits, retirees can adjust their budgets and savings strategies to ensure long-term financial stability. The end of the year in general provides an opportunity for retirees to reassess their financial plans and make necessary adjustments, taking into account not only COLAs, but healthcare costs, as well.
Maximize Your Social Security Benefit Increases
To maximize Social Security benefits, senior citizens should consider strategies such as delaying retirement to increase their benefit amounts, coordinating benefits with a spouse, and exploring other sources of retirement income. Understanding the nuances of Social Security’s rules and regulations can help retirees make informed decisions that enhance their financial well-being.
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Best Resources for Managing Retirement Benefit Payments for 2025
Several resources are available to help retirees understand the 2025 cost-of-living adjustment and its implications. The SSA website provides detailed information on how the COLA is calculated, as well as tools for estimating future benefits. Financial advisors and retirement planning workshops offered here at PlanWell FInancial can also offer guidance on navigating the complexities of Social Security or CSRS retirement income.
Reach Out to Us!
If you have additional federal benefit questions, contact our team of CERTIFIED FINANCIAL PLANNER™ (CFP®) and Chartered Federal Employee Benefits Consultants (ChFEBC℠). At PlanWell, we are federal employee financial advisors with a focus on retirement planning. Learn more about our process designed for the career fed.
Preparing for federal retirement? Check out our scheduled federal retirement workshops. Sign up for our no-cost federal retirement webinars here! Make sure to plan ahead and reserve your seat for our FERS webinar, held every three weeks. Want to have PlanWell host a federal retirement seminar for your agency? Reach out, and we’ll collaborate with HR to arrange an on-site FERS seminar.
Want to fast-track your federal retirement plan? Skip the FERS webinar and start a one-on-one conversation with a ChFEBC today. You can schedule a one-on-one meeting here.
