If you’re among the millions of older Americans who rely heavily on Social Security to make ends meet in retirement, then you may be reeling over the fact that your benefits are only going to rise by 2.5% in January.
Social Security’s upcoming cost-of-living adjustment (COLA) is the smallest (by far) to arrive in years. And it’s natural to be disappointed by a meager increase in your monthly checks.
But when we look back at the data, it becomes clear that a 2.5% Social Security COLA isn’t so terrible. In fact, it’s a lot more generous than some of the COLAs beneficiaries have seen in the past.
The Outcome Could’ve Been Much Worse
In 2024, Social Security benefits rose by 3.2%. The year prior, they increased by 8.7%. And in 2022, a 5.9% COLA came through.
In light of these numbers, it’s easy to see why a 2.5% COLA for 2025 seems like a slap in the face. But you should also know that these recent COLAs were fueled by a period of rampant inflation.
The whole reason 2025’s Social Security COLA is going to be much smaller is that inflation has eased nicely over the past year. So, what seniors lose in the form of a smaller COLA, they gain in the form of less drastic price increases on their essential expenses.
It’s also important to recognize that a 2.5% Social Security raise is by no means the worst-case scenario as far as the program’s COLAs go. On three separate occasions – 2010, 2011, and 2016 – seniors on Social Security got a 0% COLA.
And as recently as 2021, Social Security’s COLA was only 1.3%. So, while a 2.5% COLA may not exactly be cause for celebration, it’s also not a catastrophically low raise.
