The White House has just confirmed that, in view of inflation and its rebound this year, they have decided to take several economic measures. One of them will affect you, albeit in a positive way, and has been in demand since 2021. We have finally learned about the Social Security benefits rising in 2025, with several programs that will now receive more funding (and families that will have more income).
Social Security benefits rising: what we know at the moment (and what has happened)
Social Security cost-of-living adjustments (COLAs) have a major impact on the income of over 70 million Americans who receive benefits. COLAs are meant to help recipients keep up with inflation and the rising costs of goods and services.
They are based on third quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) published by the Bureau of Labor Statistics. In recent years, COLAs have been relatively small. For example, the COLA was just 1.6% for 2023 and 5.9% for 2022.
However, due to persistently high inflation, the Social Security Administration recently announced that the COLA for 2025 could be the highest increase in over 40 years. This historic jump is leading many to re-examine the role and methodology behind Social Security COLAs.
Historical announcement: Social Security benefits rising in 2025
In a historic announcement this week, the White House confirmed that Social Security beneficiaries will see their largest cost-of-living adjustment (COLA) in decades starting in 2025. Citing rising inflation, officials stated that the 2025 COLA is anticipated to increase by 9-10% – the highest bump since the early 1980s.
The White House announcement comes on the heels of recent data showing that inflation hit a 40-year high in 2024. While inflation is projected to cool somewhat in 2025, it is still expected to remain elevated compared to historical levels.
This sustained higher inflation means the automatic COLA formula used to calculate Social Security benefits will translate into a generous increase for recipients. According to the White House, the typical retiree can expect to see their monthly benefit check rise by approximately $150 in 2025.
This represents a major boost in income for many seniors and people with disabilities who rely on Social Security. With healthcare, housing, food, and other costs rising rapidly, the large COLA will help beneficiaries keep up with expenses in retirement.
Why it´s not only good news: something is behind Social Security benefits rising
The White House announcement forecasting a historic increase to Social Security benefits in 2025 is driven by projections of high inflation continuing over the next two years. The Cost-of-Living Adjustment (COLA) to Social Security is determined each year based on the Consumer Price Index (CPI-W), which measures inflation.
With inflation hitting multi-decade highs in 2022 and 2023, economists expect it to continue rising substantially through 2024 before moderating in 2025. However, inflation is still projected to be significantly above the Federal Reserve’s 2% target.
This sustained higher inflation will feed into the calculation of COLA for 2025. Current forecasts suggest the 2025 COLA could be between 8-10%, which would represent the largest increase to Social Security benefits in four decades. This is a direct result of inflation averaging around 7% annually from 2022-2024.
Experts predict that if inflation stays above 4% annually, the 2025 COLA could increase benefits by 9-10% – one of the highest bumps ever. This is a dramatic rise from the 3.8% COLA enacted for 2024 benefits. The continued impact of high grocery bills, rent, gasoline, utilities, and other common expenses will be severe next year.
As you can see, Social Security benefits rising in 2025 was the most eagerly awaited measure for years, although we will still have to wait several more months to see it become a reality. However, it is not the only one that citizens are asking for, as evidenced by the petitions for a fourth stimulus check or to extend SNAP to more families, which are still pending.
