What is the cost of living increase for 2025
Executive summary
The federal Cost‑of‑Living Adjustment (COLA) for Social Security and SSI was 2.5% for 2025, and the Social Security Administration announced a 2.8% COLA for 2026 that will take effect in January 2026 for about 71–75 million beneficiaries [1] [2] [3]. Different public and private retirement systems used related but not identical COLA figures for 2025 (for example, some federal annuitants and local plans show 2.0–3.1% adjustments) [4] [5].
1. What the headline COLA numbers are — and who they affect
The official SSA COLA that applied to Social Security benefits and Supplemental Security Income payments for calendar year 2025 was 2.5% (based on CPI‑W year‑over‑year data) [1]. The SSA announced a 2.8% increase for benefits payable in January 2026 — the agency said that increase will affect roughly 71–75 million beneficiaries and SSI recipients starting at the end of 2025 or in January 2026 [2] [3] [6].
2. Why there are multiple “COLA” numbers in circulation
COLA is calculated differently across programs and payors. The SSA COLA for Social Security/SSI uses the CPI‑W index; federal retirement systems use formulas tied to Social Security but can produce different percentages (for 2025, CSRS annuitants received 2.5% while many FERS annuitants received 2.0%) [1] [4]. Local pension boards or city systems may set their own rates tied to local rules — for example, the Los Angeles Fire & Police Pension noted a 3.1% COLA for 2025 under its plan rules [5]. That explains why veterans, federal retirees, state and local retirees and private plans report slightly different adjustments [7] [4] [5].
3. How the SSA computes the COLA and the timing
SSA computes the annual COLA from the change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI‑W) from the third quarter of one year through the third quarter of the next; that computation produced the 2.5% change used for 2025 benefits [1]. The timing of the announcement follows the Bureau of Labor Statistics CPI publication — in 2025 the agency released its COLA notice in late October (delayed in that year by a shutdown but ultimately announced Oct. 24, 2025), allowing SSA to set the 2026 percentage based on the latest CPI data [3] [8].
4. What the COLA does — and what it doesn’t cover
COLA raises monthly benefit checks by the stated percentage (2.5% for 2025 Social Security/SSI; 2.8% for 2026) to offset general inflation as measured by the CPI‑W [1] [3]. Available sources document repeated criticism that the CPI‑W‑based COLA does not fully match older Americans’ actual cost experience — notably higher medical and prescription costs — meaning many recipients see the increase absorbed by rising health care and housing expenses [9] [6]. Sources do not provide an authoritative, single estimate of how much of the COLA is eaten by particular expenses; instead they report examples and advocacy perspectives [9].
5. Impact on related amounts: wages, tax caps and premiums
SSA ties other thresholds to the COLA. For example, SSA noted that the taxable maximum for Social Security earnings would rise (to $184,500 for 2026 based on the 2.8% increase), and federal retirement and benefit‑related thresholds are adjusted using the COLA outcome [3]. Federal retirees’ health‑insurance and premium changes can move independently; reporting shows Medicare Part B premiums and federal annuitant health costs have in some years risen by larger percentages than the COLA, diminishing the net buying power gain [9] [10].
6. Divergent perspectives and political context
News outlets and advocacy groups frame the same COLA differently: SSA presents COLA as a “promise kept” to preserve purchasing power [3]; senior advocates and some retirees argue the CPI‑W undercounts retirees’ real costs, especially medical spending, leaving beneficiaries with a net loss in living standards despite the nominal increase [9] [6]. Government and plan administrators emphasize the technical method tied to CPI figures, while critics highlight mismatches between index construction and retirees’ spending patterns [1] [9].
7. Bottom line for readers who asked “What is the cost‑of‑living increase for 2025?”
The SSA’s official COLA for 2025 was 2.5% for Social Security and SSI [1]. For 2026 SSA announced a 2.8% COLA to be paid beginning January 2026 [3]. Other retirement systems and benefit programs reported related but different figures — for instance, some federal annuitants and local pension plans recorded 2.0%, 2.5% or 3.1% for 2025 depending on their rules [4] [5]. Available sources do not attempt a single unified measure of how those increases translate into net standard‑of‑living changes for every beneficiary; they report both the percentage adjustments and the dispute over whether those adjustments keep pace with retirees’ real expenses [1] [9].