Social Security Announces 2.5% COLA for 2025 Amid Easing Inflation

Social Security Announces 2.5% COLA

Social Security recipients will see a 2.5 percent bump as part of their cost-of-living adjustment (COLA) for 2025. The increase, announced on Thursday, marks the smallest in years and aligns with experts’ expectations as inflation has eased. Millions of recipients experienced their largest increase at 8.7 percent last year during decades-high inflation.

Impact on Beneficiaries

Social Security Commissioner Martin O’Malley stated that the increase will help tens of millions keep up with expenses as inflation cools. Approximately 70 million recipients will see the 2.5 percent increase starting next January. For over 7.5 million individuals receiving Supplemental Security Income (SSI), payment increases will begin on December 31.

Inflation and Economic Outlook

The Labor Department’s latest inflation data showed a 0.2 percent increase last month, with an annual rise of 2.4 percent. The Consumer Price Index (CPI-W), which factors into annual COLA calculations, also indicated a 2.2 percent increase over the past year.

Jason Fichtner, Chief Economist for the Bipartisan Policy Center, noted that while price stability is beneficial for today’s recipients, he warned about the depletion of Social Security’s trust fund. If Congress fails to act, beneficiaries may face significant cuts in less than a decade.

Federal Reserve Actions

These announcements come shortly after the Federal Reserve cut interest rates for the first time in years, reflecting confidence in the nation’s economic outlook. Recent meeting minutes indicate optimism among bankers about managing inflation.