How Social Security’s 2025 COLA Is Holding Up in These 5 Essential Consumer Categories

In 2025, Social Security retirees received a Cost of Living Adjustment (COLA). COLAs are periodic raises that are intended to help ensure benefits don’t lose buying power. Since the price of goods and services goes up over time, benefits would buy less and less every year without COLAs.

Unfortunately, ample evidence suggests that COLAs are not doing what they should to help seniors maintain their standard of living. In fact, they are likely falling far short, as research from The Senior Citizens League shows the average payment in 2024 is worth around 80 cents on the dollar compared to 2020, with the typical retiree short around $4,442.80 each year.

Buying power has eroded over time, so the big question is, is that happening still? Let’s take a look at how Social Security’s 2025 COLA is holding up in five essential consumer categories to determine if the Cost of Living Adjustment is providing enough to help seniors cover rising costs.

How the COLA is holding up to five essential consumer categories

In 2025, retirees received a 2.5% Cost of Living Adjustment (COLA). This means that payments went up 2.5%, although many seniors did not see their deposit amount increase by the full 2.5% due to a rise in Medicare premiums. Those are typically deducted from Social Security benefits for the majority of seniors on Medicare.

In order for the raise to actually cover the added costs seniors are facing, ideally, we’d want year-over-year price increases to be at or below the 2.5% raise they received. So, is that the case?

Here is the Bureau of Labor Statistics Consumer Price Index data for a few key areas, as measured by the Percent changes in CPI for All Urban Consumers (CPI-U).

• Food: The cost of food away from home rose 2.9% over the last year, as measured by the 12-month period ending in May of 2025.
• Shelter: The cost of shelter was up 3.9% year-over-year.
• Medical care services: Medical care costs are up 3.00% year over year
• Energy prices: Energy costs are down 3.5%
• Transportation: Costs of transportation are up 2.8%.

While the drop in energy prices is a bright spot for seniors, the rest of their costs are up by more than the amount of last year’s raise. That’s not a great sign for retirees on a fixed income who may be struggling to cover the costs of these basic essentials.

COLAs don’t accurately reflect the spending pattern of retirees

Unfortunately, these numbers help to underscore a troubling reality — many of the things that seniors tend to spend the most money on tend to see costs go up faster than inflation.

In fact, the Bureau of Labor Statistics reported that the overall rate of inflation showed a 2.4% year-over-year increase so far this year before seasonal adjustments, while many of these key spending areas saw bigger increases.

The issue is, retirees generally spend a larger percentage of their income than the average person on things like shelter and medical care, while younger people might spend more on entertainment or dining out. And, the consumer price index that is used to determine the COLA retirees receive is one that is based on the spending of urban wage earners and clerical workers.

Since the measure used to determine COLAs isn’t the most accurate, seniors end up paying the price with a Social Security raise that doesn’t let them maintain their buying power.

Careful planning for retirement is required because of this, as older Americans must ensure that they have enough savings to supplement Social Security, that their savings is invested appropriately so that it can keep pace with inflation without outsized risk, and that they adjust their budgets when inflation decreases the value of their benefits.

A financial advisor can provide help with these issues and can play a vital role in helping retirees ensure they have the financial security they deserve.

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