
In 2023, Social Security recipients enjoyed an 8.7% increase in their benefits, one of the most substantial cost-of-living adjustments (COLAs) in recent memory. This boost was a response to the inflationary pressures that had escalated costs dramatically across the board. Yet, the adjustment for this year dropped to 3.2%, and projections for 2025 suggest an even smaller increase of 2.66%, according to the nonpartisan Senior Citizens League.
These COLAs are calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), with the data from the third quarter determining the next year’s adjustment. While we await the official figures in October, it’s important to consider what these fluctuations mean for seniors and whether a significant COLA like that of last year could happen again.
Is Another Large COLA Likely?
Given that COLAs are directly tied to inflation, there’s always a possibility of another large increase if economic conditions lead to heightened inflation. Historically, there have been periods of substantial COLAs, such as the early 1980s, when increases of 9.9%, 14.3%, and 11.2% were seen in consecutive years. These were years of exceptionally high inflation, much like the situation that led to the 2023 adjustment.
However, while the idea of a large COLA might seem appealing, it’s important to understand the implications. Large COLAs are a symptom of high inflation, which typically means increased costs for living essentials like food, healthcare, and housing. Thus, while Social Security checks might grow, the purchasing power of these funds may not improve significantly.

Why You Might Not Want a Large COLA
For salaried employees, a big raise is unequivocally beneficial. But for Social Security recipients, the situation is more complex. Large COLAs often do not signify an improvement in financial well-being; rather, they are adjustments to match inflation. This means that even with higher Social Security payments, the cost of living may absorb much of that increase, leaving seniors no better off in terms of real purchasing power.
It’s crucial for retirees not to rely solely on Social Security. Having additional savings can provide a buffer against inflation and reduce the financial strain during periods of high price increases. This diversified approach to retirement funding ensures that seniors have multiple sources of income to cover their expenses, regardless of the economic climate.
The Impact of Modest COLAs
With projections indicating more modest COLAs in the coming years, it’s valuable to consider how this affects long-term financial planning for seniors. Smaller COLAs mean that it’s even more important to have a robust retirement plan that doesn’t rely solely on Social Security.
Investing in a diversified portfolio can help safeguard against inflation and supplement Social Security income. For those already in retirement or nearing it, ensuring that investments are balanced and aligned with their risk tolerance and financial needs is crucial. Regular reviews of one’s investment strategy can help adjust to changing economic conditions and personal circumstances.

Looking Ahead
As we anticipate the official announcement of next year’s COLA in October, seniors and those planning for retirement should continue to monitor inflation trends and adjust their financial strategies accordingly. Understanding the relationship between inflation, COLA adjustments, and purchasing power is essential for maintaining financial stability in retirement.
In conclusion, while the prospect of another large COLA like the one seen in 2023 is theoretically possible, it’s not necessarily desirable due to the underlying inflation it represents. For seniors, the focus should be on comprehensive financial planning, leveraging savings and investments alongside Social Security to ensure a secure and stable financial future.