Get ready for the 2025 Social Security COLA increase! Experts estimate a 2.5% boost, as inflation cools. The official announcement is expected mid-October.
2025 Social Security COLA Increase: What to Expect
The Social Security Cost-of-Living Adjustment (COLA) is important for the millions of Americans who rely on Social Security benefits. For 2025, the anticipated COLA increase is estimated to be about 2.5% based off current inflation figures, according to the Senior Citizens League. This number is less than the previous two years, which saw adjustments of 3.2% (2024) and 8.7% (2023). This article explores the implications of the upcoming COLA announcement for beneficiaries, the specifics of the 2025 adjustment, and what it means for federal retirees who collect income from either a FERS or CSRS pension.
If you’re a federal employee, attend a FREE retirement webinar covering FERS, Social Security, the TSP, and more. REGISTER HERE.
What is the 2025 Social Security Cost of Living Adjustment?
How is the Social Security COLA determined?
The Social Security COLA is determined by the Social Security Administration (SSA) based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W measures the average change over time in the prices paid by urban wage earners and clerical workers for a basket of goods and services. The COLA is calculated by comparing the average CPI-W for the third quarter of the current year (July, August, September) to the same period in the previous year. If there is an increase, Social Security benefits are adjusted accordingly to maintain the purchasing power of beneficiaries. If there is no increase or even deflation, Social Security benefits are unchanged.
The CPI-W tracks the prices of a fixed basket of goods and services, including food, housing, transportation, and medical care. Changes in the CPI-W indicate shifts in the cost of living, which directly influence the COLA.
The official COLA number will be released around mid-October when the inflation data from September is finalized. The adjustment goes into effect in December for Social Security and January for FERS and CSRS recipients.
Knowledge is Confidence!
What factors influence the COLA for 2025?
The COLA for 2025 is ultimately influenced by inflation rates, economic conditions, and changes in the cost of living – all three of which are intricately linked. The Bureau of Labor Statistics (BLS) plays a significant role in tracking these factors through the CPI-W. Additionally, economic policies, supply chain disruptions, and global events can impact inflation, thereby affecting the COLA. The SSA closely monitors these variables to ensure that the COLA accurately reflects the economic environment.
How accurate are the predictions for the 2025 COLA?
Predictions for the 2025 COLA are based on current economic data and trends, but their accuracy can vary. Economic conditions are influenced by a multitude of factors, including policy decisions, global events, and market dynamics. While experts use sophisticated models to forecast the COLA, unforeseen changes can impact the final adjustment. Historically, predictions have been reasonably accurate, but beneficiaries should remain aware that the actual COLA may differ from early estimates.
Other Implications of 2.5% COLA for Upcoming Year
What is the expected percentage increase for 2025?
The expected percentage increase for the 2025 COLA is a topic of much speculation. While the exact figure will be determined based on the CPI-W data for the third quarter of 2024, early predictions suggest a potential increase of around 2.5% to 3.2%. This range is based on current inflation trends and economic forecasts. However, it is important to note that these predictions are subject to change as new data becomes available.
Stay up-to-date with the latest federal benefits news: Subscribe to the PlanWell Newsletter
Medicare B Premiums
The COLA increase will directly affect the monthly benefits received by Social Security beneficiaries. For example, if the COLA for 2025 is set at 2.5%, a beneficiary receiving an average monthly benefit of $1,500 would see an increase of approximately $38 per month. This adjustment theoretically helps beneficiaries maintain their purchasing power in the face of rising living costs, but many recipients are acutely aware that their Medicare part B premiums are taken directly from their Social Security retirement benefits. In 2024 for instance, the 3.2% cost-of-living adjustment was offset by an average increase of 5.94% in the premium cost of Medicare B, meaning some beneficiaries saw a net decrease last year of -2.74%. Medicare B premiums are something to keep in mind when forecasting Social Security income for 2025.
2025 COLA for FERS and CSRS
According to projections, the 2025 COLA could be one of the less substantial increases in recent years, reflecting gradual easing of inflationary pressures. Should the COLA turn out to be 2.5%, then federal retirees with a CSRS (Civil Service Retirement System) pension would see a boost in their retirement check of the same percentage. As for federal employees who retired under FERS (Federal Employee Retirement System), the COLA would be a flat 2.0%.
The chart below displays how the cost-of-living adjustment works for FERS:
| If CSRS/Social Security COLA is… | Then the FERS COLA will be… |
| 2.0% or less | equivalent to CSRS and Social Security |
| 2.0% to 3.0% | flat 2.0% |
| 3.0% or higher | CSRS/Social Security COLA minus 1.0% |
Are Social Security beneficiaries prepared for the 2025 COLA?
How to manage finances with the expected COLA increase
Social Security beneficiaries can take several steps to maximize their benefits in light of the 2025 COLA. First, staying informed about the expected COLA increase and its implications is crucial. Beneficiaries should review their financial plans and consider how the increased benefits can be best utilized. Additionally, exploring other sources of income, such as part-time work or investments, can provide additional financial security. Consulting with a financial advisor can also help beneficiaries make informed decisions about their benefits.
Schedule a meeting with one our advisors today.
Managing finances with the expected COLA increase involves careful planning and budgeting. Beneficiaries should assess their current expenses and identify areas where the additional income can be most effectively allocated. Prioritizing essential expenses such as healthcare, housing, and food is important. Additionally, setting aside a portion of the increased benefits for savings or emergency funds can provide a financial cushion. By taking a proactive approach, beneficiaries can make the most of the COLA increase and enhance their financial stability.
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.
