How much could COLA be in 2025? The first estimates for the next cost-of-living adjustment
Just a few months after Social Security payments were adjusted, projections for COLA 2025 are already beginning to emerge: How much would payments increase?
Each month, the Social Security Administration (SSA) issues millions of payments to the beneficiaries of its program who are mostly retired workers, in addition to people with some type of disability. The latter fall under the category of Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI), depending on their personal situation.
Because the majority of Social Security beneficiaries depend on these checks to live on, the SSA makes an annual adjustment to match payments with inflation and avoid the loss of purchasing power for recipients, especially when the inflation rate is high. This balancing act between checks and inflation is known as Cost of Living Adjustment or COLA.
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How the COLA is determined
The COLA is calculated based on the Consumer Price Index for Salaried Workers in Urban Areas and Administrative Workers (CPI-W). To determine the increase in payments, SSA compares the CPI-W for the third quarter of the previous year (July, August and September) with the CPI-W for the third quarter of the current year.
The difference between them will correspond to the increase in next year’s COLA. For 2024, the increase was 3.2%.
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How much could COLA be in 2025? The first estimates for the next cost-of-living adjustment
The COLA increase is announced in October, while the increased payments begin to be handed out starting the following January. Although there are still about eight months to go until the 2025 COLA is known, the first estimates have already begun to emerge.
According to The Motley Fool, a private financial advisory and investment firm, the COLA for 2025 is likely to be higher than the average of 2.6% of the last 20 years. If housing prices remain high despite the slowdown in inflation, the increase in the COLA for next year could be 3%, according to their first projections.
If this projected percentage holds true, the monthly payments of a retired individual would increase by nearly $60. With this, the average payment of a retired worker in 2025 would go from $1,907 to $1,967. However, this figure is speculative and could change at any time, as it depends on how the economic situation in the country develops in the coming months.