Social Security Administration announces 2.5% cost-of-living adjustment for 2025, lowest increase since 2021

• More than 72.5 million beneficiaries will see a 2.5% increase to their Social Security and Supplemental Security Income benefits in 2025, the Social Security Administration announced Thursday.
• Social Security retirement benefits will increase about $50 per month on average starting in January.
• The adjustment is the lowest since 2021 as the pace of inflation has subsided.

More than 72.5 million Americans will see a 2.5% cost-of-living adjustment to benefit payments in 2025, the Social Security Administration announced Thursday.

With the change, Social Security retirement benefits will increase by about $50 per month on average starting in January, according to the agency.

The Social Security Administration first announced the change on Thursday morning via its press office feed on X and confirmed the news to CNBC by phone.

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The Social Security cost-of-living adjustment for 2025 is the lowest annual rise since 2021, when beneficiaries saw a 1.3% increase to benefits. In recent years, COLAs have been larger in response to high inflation.

While the cost-of-living adjustment for 2024 was 3.2%, beneficiaries saw the highest increases in four decades in 2023, with an 8.7% rise, and in 2022, with a 5.9% boost to benefits.

Now that the pace of inflation has come down, the cost-of-living adjustments are more average. Social Security's annual benefit increases have averaged about 2.6% over the past 20 years, according to The Senior Citizens League, a nonpartisan senior group.

"The COLA is a vital component of Social Security, ensuring older Americans have an inflation protected source of income in retirement," AARP CEO Jo Ann Jenkins said in a statement. "This adjustment means older Americans will receive needed relief to help better afford essential items from groceries to gas."

Even with this adjustment, many older Americans may find it hard to pay their bills amid persistent higher prices, she said. For about 40% of older Americans, Social Security is their primary source of income, according to AARP.

How to determine how big your benefit checks will be

Current beneficiaries can approximately gauge how much their benefits may change by multiplying their current monthly benefit check amount by the percentage increase, according to Joe Elsasser, a certified financial planner and president of Covisum, a Social Security claiming software company.

To calculate the size of next year's benefit increase more precisely, it helps to factor in Medicare Part B premiums, which are often deducted directly from benefit checks. The standard Medicare Part B premium is projected to increase to $185 per month in 2025, up from $174.70 in 2024. Some beneficiaries may pay higher premium rates based on their incomes.

The bigger your Social Security benefit, the larger dollar amount increase to benefits you will see. Because benefits increase by 77% for waiting to claim retirement benefits from age 62 to age 70, the cost-of-living adjustments help show why it can be better to delay claiming benefits, according to Elsasser.

"The initial claim decision has the biggest impact on the size of your check," Elsasser said.

The Social Security Administration plans to begin notifying beneficiaries of their new benefit amounts by mail starting in December.

This year, the agency is providing a new one-page COLA notice that will detail benefit amounts, including any deductions, and the exact dates the 2025 checks will start.

COLA statements will also be available online. However, beneficiaries will need to have a My Social Security account by Nov. 20 in order to see their notices.

Correction: In recent years, COLAs have been larger in response to high inflation. An earlier version misstated the level of inflation.