For most retirees, Social Security is an essential source of income. In each of the last 23 years, Gallup has surveyed retirees to assess how much they rely on this important social program. Across the board, 80 to 90 percent of retirees say their Social Security check is a “major” or “minor” source of income.

Considering how important Social Security income is to retirees’ financial foundation, it’s no surprise that the Annual Cost of Living Adjustment (COLA) is the most anticipated announcement of all time. The fourth consecutive year of an above-average COLA means the program’s more than 68 million beneficiaries will receive a larger check in the new year.

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What is the Social Security COLA and why is it important?

The Social Security cost of living adjustment is the tool the Social Security Administration (SSA) relies on most years to adjust benefits for inflation.

Hypothetically speaking, if the cost of a broad basket of goods and services that seniors regularly purchase increases by 3%, Social Security checks should also increase by 3% to ensure there is no loss of purchasing power. COLA is the mechanism that takes these price changes into account and adjusts benefits accordingly.

Beginning in 1975, the Consumer Price Index for Urban Wage Earners and Office Workers (CPI-W) became the inflation measure for calculating COLAs annually. The CPI-W has more than 200 different spending categories, each with its own weighting. These weights allow the CPI-W to be reduced to a single number at the end of each month, allowing for easy year-over-year comparisons to determine whether prices are rising (inflation) or falling (deflation) overall. ).

Although the CPI-W is reported monthly, only the values ​​from the third quarter (July to September) are included in the calculation. If the average CPI-W score in the third quarter of the current year is higher than the comparable period last year, inflation has occurred and benefits are expected to increase. The benefit check increase is simply the percentage increase in the average third quarter CPI-W from one year to the next, rounded to the nearest tenth of a percent.

For 2025, Social Security recipients will receive a 2.5% COLA. Although this represents the lowest COLA since 2021, it is still the fourth consecutive year of above-average increases – 2.5% in 2025 versus about 2.3% on average over the previous 15 years.

An increase in the prevailing inflation rate has resulted in four consecutive above-average COLAs. US inflation rate data from YCharts.

Here’s how much the average benefit recipient will receive each month in 2025

However, there is a big difference between giving a percentage and calculating what a 2.5% cost of living adjustment actually means in dollar terms for the typical Social Security recipient. Let’s take a closer look at what the average monthly Social Security check will look like in 2025.

Before we proceed, be aware that the SSA has not announced what the average benefit will be for its over 68 million beneficiaries. This means that I will do some calculations (which I will do to you) to determine how much the average beneficiary will receive.

It’s important to note that average Social Security benefits do not stay the same over the course of a year because new beneficiaries are added each month. As inflation increases nominal wages and salaries over time, these new beneficiaries tend to slightly increase the average monthly payout.

Based on Social Security’s Monthly Statistical Snapshot data, the average Social Security check increased from $1,767.03 in December 2023 – December is the month in which the SSA Snapshot recognizes annual COLAs in its data releases – to $1,788.12 -dollar in November 2024. That represents an organic increase in payouts of $21.09 11 months or $1.92 per month.

If this organic increase remains constant at $1.92, the average payout for 68.4 million beneficiaries will increase to $1,790.04 before accounting for the 2025 COLA. Including the announced 2.5% COLA, the average monthly Social Security check will rise to $1,834.79 at the start of the new year, an estimated increase of $44.75 per month. In 2025, the average beneficiary should bring home just over $22,000 annually from America’s leading retirement program.

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How much will the average retiree, disabled worker and survivor beneficiary receive in 2025?

What’s notable, however, is that when it comes to Social Security, there are wide differences in average monthly payouts between the main categories: retired workers, workers with disabilities, and survivors of deceased workers. Let’s also briefly examine how Social Security’s 2025 COLA will impact the average check for these three groups of beneficiaries.

This program was created primarily to provide a financial foundation for those who can no longer do this themselves. Retirees make up 75.6% of all benefit recipients and received 81.4% of benefits paid in November.

Based on estimates from the 2025 fact sheet published by the SSA, retiree benefits are expected to increase by $49 per month to $1,976 in 2025. This equates to a projected annual payout of $23,712 for the typical retiree.

The approximately 7.24 million workers with disabilities currently receiving benefits will also see a 2.5% increase in their monthly check in the new year. The SSA’s fact sheet predicts an increase of $38 per month, from $1,542 to $1,580 in 2025.

Ultimately, 5.8 million survivors of deceased workers are in line to receive the 2.5% COLA next year. Although the SSA did not include this group in its fact sheet, the estimated increase in monthly payout (calculated by me) is also about $38. In short, the average survivor can expect their monthly Social Security check to increase from $1,513 to an estimated $1,551.