Have you ever wondered why your Social Security checks arrive with a little more money starting in January of each year? Well, that’s because of something called the cost of living adjustment (COLA), which is applied by the Social Security Administration (SSA) to the millions of beneficiaries who receive payments for retirement, Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI).
But what does that mean, how is it calculated, how much is it, and all those questions you’re asking yourself? We will clear all your doubts, don’t worry. Just keep reading and find out.
What is a COLA in Terms of Social Security?
The COLA is basically an annual adjustment that the U.S. government makes. It is applied to Social Security benefits to make sure they maintain their value against inflation and their purchasing power.
In other words, because the cost of things (food, housing, healthcare services, etc.) tends to go up over time, the COLA helps keep benefit payments from falling behind. This adjustment is designed so that you can keep buying the same thing with your Social Security check, even if prices increase.
This Is How the SSA Calculates the COLA Adjustment
The COLA increase each year is calculated using a formula that is based on the Consumer Price Index for Urban and Clerical Workers (CPI-W).
This index measures the changes in the prices of a basket of goods and services that people usually buy. If prices go up, the Social Security COLA goes up, and if prices remain stable or go down, the COLA may be very low, or even no increase will be applied.
The COLA is announced every year in the month of October, and then applied in the following month of January. In other words, each year starts for the beneficiaries with an increase depending on the inflation indicated by the CPI-W. You do not have to do anything, or any procedure: it is applied automatically and your deposits, for the next twelve months, will come with that increase.
How Big Is the COLA Increase Every Year?
Well, that depends on the year. Some years, the increase can be quite significant, especially if inflation has been high. Other years, the COLA may be minimal. Here we’ve put together a list with the increases of the COLA from 2004 to 2024 to give you an idea:
- 2004: 2.7%
- 2005: 4.1%
- 2006: 3.3%
- 2007: 2.3%
- 2008: 5.8%
- 2009: 0.0%
- 2010: 0.0%
- 2011: 3.6%
- 2012: 1.7%
- 2013: 1.5%
- 2014: 1.5%
- 2015: 1.7%
- 2016: 0.0%
- 2017: 0.3%
- 2018: 2.0%
- 2019: 2.8%
- 2020: 1.6%
- 2021: 1.3%
- 2022: 5.9%
- 2023: 8.7%
- 2024: 3.2%
Sometimes the COLA Increase Is Higher Than Others
The size of the COLA depends on how inflation has been during the year. For example, in 2022, the COLA was 5.9% because prices went up quite a lot. In contrast, in 2010 and 2016, there was no increase because inflation was practically zero. So the COLA can vary quite a bit from year to year.
Social Security COLA 2025: Good News for Retirees?
The most recent estimates of The Senior Citizens League (TSCL), a non-profit organization that looks out for the good of retirees, estimated at the end of July 2025 that the COLA increase for the year 2025 will be particularly lower than the one for 2024.
So far, the available data indicate that retirement benefits, SSI, and SSDI will increase by only 2.63%, but there are still a couple of months of inflation statistics to come to a definitive number that will be announced in October.