2025 Social Security COLA forecasts to be updated next week: What we know so far

In mid-October, the Social Security Administration (SSA) will reveal the Cost of Living Adjustment (COLA) for 2025.

The COLA will be based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) numbers for July, August, and September. The CPI-W is an indicator of inflation published by the Bureau of Labor Statistics (BLS) and differs from the more commonly used CPI for All Urban Consumers (CPI-U), which tracks inflation across markets for goods and services.

To calculate the COLA, the SSA compares the three-month average of the CPI-W to the same period of the previous year. If the prices have risen, the percentage increase is added to the benefits each year. The COLAs have been more generous in the last two years than in previous years. The SSA applied a 3.2 percent increase to benefits in 2024, and a whopping 8.7 percent boost was tacked on in 2023.

Current 2025 COLA forecasts

Next week, the BLS will release the CPI report for April, which will give COLA forecasters a better idea of where markets are heading and help them better adjust their calculations for the 2025 benefit increase. According to the CPI-W, prices have increased by 1.5 percent since October. To exceed the COLA offered this year, prices would have to increase by an additional 1.7 percent by the end of September, or at least 0.28 percent each month. In February, the Senior Citizens League estimated that the 2025 COLA would be 1.75 percent. However, since that article was published, prices have continued to rise, with the total captured by the more general CPI in February and March adding up to a 0.8 percent increase.

A push for a more specific CPI indicator

There has been an effort to create a new indicator, the CPI for the Elderly (CPI-E), that would track prices for goods and services weighted towards those more traditionally consumed by people 62 and older who often depend on Social Security benefits. Over the last two decades, organizations like the Senior Citizens League have found that the purchasing power of benefits like Social Security and Supplemental Security Income (SSI) have not kept up with inflation and that around forty percent of their purchasing power.

Democrats in the Senate and the House of Representatives have proposed legislation establishing a CPI-E. If approved, this indicator will be used to calculate the Social Security COLA that is applied to all benefits distributed by the SSA. In the House, the bill has been proposed by Arizona congressman Ruben Gallego, who is running for the state’s Senate seat left open by Kirsten Sinema, who has opted to forgo a second term.