What is COLA: Legislation enacted in 1973 provides for cost-of-living adjustments, or COLAs. With COLAs, Social Security and Supplemental Security Income (SSI) benefits keep pace with inflation.
COLA Latest Updates
The latest COLA is 2.5 percent for Social Security benefits and SSI payments.
Social Security benefits will increase by 2.5 percent beginning with the December 2024 benefits, which are payable in January 2025.
Federal SSI payment levels will also increase by 2.5 percent effective for payments made for January 2025.
Because the normal SSI payment date is the first of the month and January 1 is a holiday, the SSI payments for January are always made at the end of the previous December.
The Social Security Act specifies a formula for determining each COLA.
According to the formula, COLAs are based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
CPI-Ws are calculated on a monthly basis by the Bureau of Labor Statistics.
A COLA effective for December of the current year is equal to the percentage increase (if any) in the CPI-W from the average for the third quarter of the current year to the average for the third quarter of the last year in which a COLA became effective.
If there is an increase, it must be rounded to the nearest tenth of one percent. If there is no increase, or if the rounded increase is zero, there is no COLA for the year.
The last year in which a COLA became effective was 2023. Therefore the law requires that we use the average CPI-W for the third quarter of 2023 as the base from which we measure the increase (if any) in the average CPI-W.
The base average is 301.236, as shown in the table below.
Also shown in the table below, the average CPI-W for the third quarter of 2024 is 308.729.
Because this average exceeds 301.236 by 2.5 percent, the COLA effective for December 2024 is 2.5 percent.
The COLA calculation, with the result rounded to the nearest one-tenth of one percent, is:
CPI-W for— | ||
---|---|---|
2023 | 2024 | |
July | 299.899 | 308.501 |
August | 301.551 | 308.640 |
September | 302.257 | 309.046 |
Third quarter total | 903.707 | 926.187 |
Average (rounded to the nearest 0.001) | 301.236 | 308.729 |
FAQ
1. When will the COLA take effect for Social Security benefits?
Social Security benefits will increase by 2.5% starting with the December 2024 benefits, which are payable in January 2025.
2. When will the COLA take effect for SSI payments?
The 2.5% increase for SSI payments will be effective for January 2025. However, because January 1st is a holiday, SSI payments will be made at the end of December 2024.
3. How is the CPI-W related to COLA?
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is used to measure inflation. If the average CPI-W from the third quarter of the current year shows an increase compared to the third quarter of the last year when COLA was effective, a COLA is applied to benefits.
4. What was the CPI-W used for the 2025 COLA?
The base average CPI-W for 2023 was 301.236, and the average CPI-W for the third quarter of 2024 is 308.729. The increase between these two values is 2.5%, which is the basis for the 2025 COLA.
5. What happens if there is no increase in CPI-W?
If there is no increase in the CPI-W or if the calculated increase is too small (rounded to zero), then there is no COLA for that year.
6. Why does COLA matter for beneficiaries?
COLA helps ensure that Social Security and SSI benefits retain their purchasing power in the face of inflation, helping millions of Americans meet rising costs of living.
7. Where can I find more information about my COLA notice?
You can view your personalized COLA notice securely through your my Social Security account online. Notices are also sent by mail starting in early December.
Leave a Reply