Social Security’s 2025 COLA Will Be Lower, But It’s Not All Bad News
October 2, 2024
Social Security laws stipulate that the amount of money paid to Americans who receive Social Security benefits (old age and disability benefits) must be adjusted annually for inflation.
This is known as a Cost-of-Living Adjustment, or COLA. Enacted into law in 1973 and becoming effective in 1975, the annual COLA is intended to help beneficiaries keep pace with inflation.
The Senior Citizens League (TSCL), a nonprofit advocacy group, estimates benefits will get a 2.5% COLA bump next year, which would be the smallest COLA Social Security beneficiaries have received since 2021.
However, inflation has cooled markedly in recent months. In August, the Federal Reserve’s key inflation rate dropped to an annualized rate of 2.2%, very near the Fed’s target rate of 2%.
If you are receiving a monthly check from Social Security Disability, the amount of your benefits may not be going up as much as you’d like, but you will benefit in other ways from falling inflation and lower interest rates. A more normal COLA rate is good news.