Social Security Payments Rise 2.5% July 2025 Benefiting Millions

Social Security recipients saw a 2.5% cost-of-living adjustment (COLA) increase starting in January 2025, resulting in slightly higher monthly payments through July and beyond, with the average retired worker now receiving about $1,976 monthly. This modest COLA follows larger increases in previous years due to higher inflation, such as 8.7% in 2023 and 3.2% in 2024, reflecting a cooling inflation environment. Historically, COLA adjustments have varied, with periods like the 1990s seeing smaller, steady increases around 2% to 3%, which generally align with the Federal Reserve’s target inflation rate and help maintain retirees’ purchasing power without the downsides of high inflation. Looking ahead, the 2026 Social Security COLA may be influenced by potential inflation driven by tariffs, as warned by Federal Reserve Chair Jerome Powell, who noted that tariffs imposed by the White House could sustain inflation pressures despite recent interest rate pauses. President Trump has publicly criticized Powell’s handling of monetary policy amid these inflation concerns. Given Social Security’s importance—covering 40% of pre-retirement income for many retirees and historically relying on the CPI-W to calculate COLAs—the upcoming 2026 adjustment is highly anticipated and may mark a significant moment if inflation trends shift notably.