The Social Security Administration (SSA) has been adjusting benefits every year since 1975 to help ensure that retirees don’t lose purchasing power due to inflation. However, since the COVID-19 pandemic, inflation has been rising at a faster pace than usual, often exceeding the Federal Reserve’s target.
This has resulted in the longest period of significant Cost-of-Living Adjustment (COLA) increases since 1996. In recent years, the COLA increases for Social Security benefits were 5.9% in 2022, 8.7% in 2023, 3.2% in 2024, and 2.5% for 2025. While these increases were meant to provide a financial cushion for retirees, new data and potential changes in government policies could be worrying for beneficiaries.
In 2025, the COLA may not keep up with rising inflation. The SSA determines COLA increases based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from July, August, and September of the prior year. If inflation decreases in the coming year, the COLA increase could outpace price increases. However, if inflation remains steady, the adjustment will likely only keep pace with inflation.
In 2025, inflation has started accelerating again, and by the time the COLA increase was announced in October, inflation was already higher than the 2.5% boost for the following year. This could result in Social Security recipients seeing their benefits fall behind the rising cost of goods and services.
In fact, in 2024, the annual inflation rate was 2.9%, which means that the increase in Social Security benefits was still not enough to cover the inflation retirees experienced throughout the year. The same situation occurred in 2023 and 2022 as well.
Since 2010, COLA increases have often been smaller than the overall inflation rate. As a result, Social Security beneficiaries have been receiving monthly payments that are hundreds of dollars less than what they would have been if the COLA adjustments had matched the true cost of living.
The Senior Citizens League, an advocacy group, has been vocal about the problem. Their “2024 Loss of Buying Power” report reveals that in 2024, the average Social Security payment is only worth about 80 cents for every dollar it was worth in 2010. This means that seniors are feeling the effects of inadequate payments, which are not enough to cover the increasing cost of living.
Additionally, new policies under the Trump administration could further drive up inflation. Since taking office for a second term on January 20, former President Donald Trump has already started implementing some of his campaign promises, which could lead to higher inflation in the US. One of these is imposing tariffs on imported goods from major trading partners, which would increase the cost of everyday products.
Trump has also proposed mass deportation programs that could create labor shortages, pushing wages higher, but at the same time, leading to even higher prices for goods and services. Another proposal includes eliminating taxes on tips, overtime pay, and even Social Security benefits for seniors. According to the Congressional Budget Office, these policies could speed up the insolvency of the Old-Age and Survivors Insurance Trust Fund by up to three years, causing the fund to run out of money as early as 2031.
Once the fund runs out, retirees could face benefit cuts of up to 23%, or about $16,500 annually for the typical couple receiving retirement benefits. This could have a severe impact on retirees who are already struggling with the rising cost of living.
As inflation continues to outpace the COLA adjustments, Social Security recipients could find themselves in a more difficult financial position in the coming years. While policymakers need to find solutions to protect retirees, the current trajectory of inflation, combined with potential new government policies, may continue to put pressure on retirees’ financial well-being.
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