Social Security's annual cost-of-living adjustments (COLAs) are calculated based on how inflation changes in the third quarter, the three-month period from July through September. In this scenario, inflation is measured using a subset of the Consumer Price Index (CPI) known as the CPI-W.

With a little more than a month before the 2025 COLA kicks in, here's what you should know about the upcoming adjustment.

But when we look back at the data, it becomes clear that a 2.5% Social Security COLA isn't so terrible. In fact, it's a lot more generous than some of the COLAs beneficiaries have seen in the past. In 2024, Social Security benefits rose by 3.2%. The year prior, they increased by 8.7%. And in 2022, a 5.9% COLA came through.

Social Security will see several major changes take effect on Jan. 1. Some of them, like the 2.5% cost-of-living adjustment (COLA), will affect all program recipients. But a small group of Social Security beneficiaries will reach a major milestone next year that will have them collecting larger checks than anyone has in the history of the program.

A 2.5% cost-of-living adjustment increase will mean an extra $50 a month for most Social Security and SSI recipients.