Social Security benefits will arguably lose buying power next year because the 2.5% COLA understates inflation.

A free my Social Security Account will allow recipients to view the latest COLA notices detailing the exact amount they will receive starting next year.

In December, SSI recipients will receive their payments a day early – Dec. 31 – because Jan. 1 is the New Year’s Day holiday. These checks will reflect two different amounts because the 2025 Cost of Living Adjustment increase will apply to the payment made on Dec. 31.

If it weren't for Social Security, millions of older Americans would no doubt struggle to keep up with their ongoing expenses. That's what makes Social Security's cost-of-living adjustments (COLAs) so important.

A Social Security cost of living increase offers retirees options such as managing costs, saving or enjoying small splurges.

The most direct and obvious effect of the new COLA is the increase in monthly benefits. If your monthly Social Security benefit is $1,000 this year, it will be $1,025 starting in January 2025. If it's $2,000 now, it'll be $2,050.

Still, the recent news raises a handful of questions among the retirees it impacts the most. Here are a few things you might want to know about these annual cost-of-living adjustments. The annual COLA isn't a number arbitrarily decided by the Social Security Administration.

The annual Social Security cost-of-living adjustment, or COLA, is one of the most important features of the government program. Without those annual raises, seniors would quickly find the purchasing power of their monthly annuity checks failing to meet their needs. That might feel like the case for some even with the COLA.