In 2025, millions of Americans receiving benefits through Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), and Veterans Affairs (VA) are expected to see an increase in their monthly payments.
This rise, known as the Cost of Living Adjustment (COLA), is estimated to be between 3.2% and 3.5%. It’s designed to help people keep up with inflation so they can continue to afford essential items like food, rent, and medical care.
In this article, we’ll break down how the 2025 COLA increase could affect you, how it’s calculated, and what you can do to make the most of this change.
What Is COLA and Why Is It Important?
COLA stands for Cost of Living Adjustment. It’s a yearly increase in government benefits like SSDI, SSI, and VA compensation. The aim is to help people on fixed incomes deal with the rising prices of everyday goods and services. Without this increase, the value of these benefits would drop over time due to inflation.
The Social Security Administration (SSA) calculates COLA using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index looks at the average change in prices for items like groceries, fuel, healthcare, and housing. If inflation rises, COLA makes sure your benefits go up too.
Expected COLA Increase in 2025
Experts predict that the 2025 COLA will fall between 3.2% and 3.5%. While this is lower than the record-breaking 8.7% hike in 2023, it still helps offset higher costs that people face daily. The official announcement will be made in October 2024.
How COLA Affects Different Benefit Programs
Let’s take a closer look at how this increase will impact SSDI, SSI, and VA benefits.
1. Social Security Disability Insurance (SSDI)
SSDI is for people who can no longer work due to disability and have a work history with Social Security contributions. In 2024, the average SSDI payment is around $1,500. With a 3.2% COLA, the 2025 payment would increase by about $48, bringing the average monthly benefit to $1,548.
2. Supplemental Security Income (SSI)
SSI supports people with low income and few resources, including the elderly and those with disabilities. It doesn’t depend on work history. In 2024, an individual receives about $914 per month, and a couple receives $1,371. After a 3.2% COLA, those payments would increase to about $944 for individuals and $1,415 for couples.
3. Veterans Affairs (VA) Benefits
VA benefits are for veterans with service-connected disabilities. A 100% disabled veteran currently gets around $3,900 per month. With a 3.2% increase, that would rise by about $125, making the new amount approximately $4,025 per month.
How COLA Is Calculated
The calculation is based on CPI-W data from July to September of each year. If prices have increased compared to the same period the year before, the SSA applies a COLA. This keeps your benefits in line with real-world expenses.
Historical COLA Increases
Since 1975, COLA has ranged from 0% to 14.3%, depending on inflation. The highest ever was in 1980 at 14.3%, while in 2023, there was a large 8.7% jump due to high inflation after the pandemic. These increases play a major role in helping fixed-income households survive rising costs.
Impact on Families and Dependents
If you’re receiving SSDI, SSI, or VA benefits and have dependents, they may also get higher payments. COLA generally applies to both the main recipient and any qualifying family members, making sure the entire household benefits.
How the Increase Affects Taxes
While SSI benefits are not taxed, SSDI benefits may be taxable depending on your total income. VA benefits are usually tax-free. A higher COLA might push some people into a taxable range, so it’s a good idea to speak with a tax advisor if you’re unsure about your status.
Managing the COLA Increase: Smart Tips
Even a small increase can make a difference if you use it wisely. Here’s how you can plan:
Update Your Budget: With prices going up, it’s important to recheck your expenses and make sure the extra money goes where it’s needed most.
Plan for Emergencies: Set aside part of your increase for medical costs, home repairs, or emergencies.
Think Long-Term: Inflation isn’t going away. Saving even a small portion of your increase each month can help you build a cushion for the future.
Why the 2025 COLA Matters More Than Ever
Though smaller than past increases, the 2025 COLA comes at a time when many Americans are still recovering from high food, fuel, and housing costs. Even a modest 3.2% bump can provide some breathing room and help maintain basic quality of life for those relying on SSDI, SSI, or VA benefits.
By understanding how the increase works and making a few smart financial choices, beneficiaries can stretch their payments further and stay ahead of rising prices.
