We’re a few months away from the official COLA announcement, but we can be pretty sure about this.
The 3.2% Social Security cost-of-living adjustment (COLA) for 2024 was well under the 8.7% boost seniors got in 2023. Though it added about $59 per month to the average Social Security benefit, some seniors felt this didn’t go far enough. Many hope the 2025 COLA will bring some much-needed relief.
We’re still a couple of months away from the official announcement, but there’s good reason to suspect the 2025 COLA will be smaller than what we’ve seen over the last couple of years. It’s not all bad news, though.
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Why the 2025 Social Security COLA will likely be less than 3.2%
The government doesn’t pull a Social Security COLA number out of thin air. It’s based on an analysis of the change in average third-quarter inflation data, as measured from one year to the next. It sounds more complicated than it is.
Basically, the Social Security Administration takes the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) figures for July, August, and September for the current year, totals them, and divides them by three to arrive at the average. Then, it does the same for July, August, and September of the previous year. The percentage increase between the two averages is the COLA.
Between the third quarters of 2022 and 2023, the CPI-W rose about 3.2%, which is how we got a 3.2% COLA for 2024. We’ve still got a way to go in the third quarter of 2024, so we won’t know what the 2025 COLA will look like until October. But we can make some assumptions based on the CPI-W figures we’ve seen so far.
Values continue to tick upward, but they’re doing so more slowly than in recent years. This trend seems likely to continue, which could lead to a smaller 2025 COLA. The Senior Citizens League (TSCL) confirms this view, with its latest COLA projection coming in at just 2.63%. That would raise the average $1,918 monthly retirement benefit to $1,968 per month — a $50 increase.
What this means for seniors
It may be disappointing to hear that you won’t get a huge Social Security COLA next year, but there is a silver lining. Lower COLAs mean inflation rates are lower, so retirees may not experience too much additional strain on their budgets.
When the government announces the official COLA, you’ll be able to estimate what your checks will look like next year. The Social Security Administration will follow up with personalized COLA notices in December. Once you know how much your checks will be worth in 2025, you can plan next year’s budget.
If you don’t believe your Social Security benefits will go far enough, you might have to rely more upon your personal savings or consider other ways to make ends meet. This might involve working part-time in retirement, slashing expenses, or applying for other government benefits. It’s best to plan your strategy in advance, so you know exactly what you can afford each month as you head into 2025.
