The reason Social Security benefits are eligible for an automatic cost-of-living adjustment (COLA) each year is that without an inflation-based boost, seniors would be guaranteed to lose buying power from one year to the next.

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.

If you're retired or will be retiring soon, Social Security will likely play a role in your financial future. More than 40% of baby boomers say their benefits will be their primary source of income in retirement,