COLA for 2025 is 2.5 Percent, Calls Increase for Congress to Equalize Increases

Next year’s cost of living increase (COLA) for Social Security recipients, Supplemental Social Security (SSI) recipients, and federal retirees, will be 2.5 percent. That figure was announced last week by the Social Security Administration (SSA).

That means recipients will receive 2.5 percent more in their benefits starting in January 2025. In raw dollars, that’s about $50 extra a month.

COLA is calculated each year using the government’s inflation data to try and keep benefits on par with inflation. Next year’s increase is down from 2024’s 3.2 percent increase and significantly lower than 2023’s record 8.7 percent, when inflation was running much hotter.

“Social Security benefits and SSI payments will increase in 2025, helping tens of millions of people keep up with expenses even as inflation has started to cool,” said Commissioner of Social Security Martin O'Malley.

And for the first time, Social Security beneficiaries will receive a simplified COLA notice on just one page, that uses “plain and personalized language, and provides exact dates and dollar amounts of a person's new benefit amount and any deductions.”

“Diet” Cola Back in Focus

However, the COLA will be lower for many federal retirees.

Retirees enrolled in the Federal Employee Retirement System (FERS) and not the older Civil Service Retirement System (CSRS), will receive an increase of just two percent.

Under law, when COLA is between two and three percent, FERS annuitants automatically receive a two percent COLA.

The initial rationale from Congress for giving FERS participants a “diet” COLA was to better align the value of the FERS system with the overall value of the larger CSRS annuity. The FERS annuity, along with Social Security and the Thrift Savings Plan (TSP), create the three components of retirement for FERS retirees.

However, federal labor groups and Democrats in Congress have warned for years that differences over time have left FERS retirees with significantly less money than they would have received under the full COLA amount.

Thus far, legislation such as the Equal COLA Act (H.R. 866), which would require CSRS and FERS retirees to receive the same adjustment, has failed to advance.  

William Shackelford, President of the National Active and Retired Federal Employees Association (NARFE), called for passage of the Equal COLA Act while expressing frustration about this year’s COLA increase.

“This COLA also does not account for the sharp increase in the enrollee share of health insurance premiums affecting the federal community, which will rise by an average of 13% next year for federal annuitants. While such increases may impact the following year’s COLA, they are not yet reflected in the past year’s data,” said Shackelford.