The Social Security Administration said Thursday that the COLA will be 2.5% in 2025, down from the 3.2% increase in 2024. The average beneficiary’s monthly payments will rise by $50 next year to $1,957, up from $1,907 in January 2024.

The annual COLA is intended to prevent beneficiaries’ purchasing power from being weakened by inflation. However, USA TODAY reported that many older Americans say this is not the case. According to an AARP survey of 1,000 adults age 50 and older, 83 percent of older adults said in August that a COLA of less than 3 percent would not be enough.

Here’s what you should know.

How is COLA calculated?

COLA is based on the percentage increase in the consumer price index for urban wage earners and office workers from July to September of last year compared to the same three months of the current year. CPI-W tracks the overall inflation rate, but may vary slightly.