FINANCE
Latest 2025 Social Security COLA forecast: The good and bad news for seniors
With the June Consumer Price Index in hand, we can update our forecasts for the 2025 Social Security COLA. Here is the good and bad news for retirees.
The Bureau of Labor Statistics released the June Consumer Price Index (CPI) report on Thursday, which provides more information to project the 2025 Cost-of-Living Adjustment (COLA) that will be applied to benefits distributed by the Social Security Administration (SSA) next year. The SSA uses the CPI for Urban Wage Earners and Clerical Workers (CPI-W) to calculate the COLA, and in June, the BLS tracked a decrease in average prices for the first time in since May 2020. While over the last year, the rate at which prices were increasing slowed, they had continued to rise, continuing to put pressure on Social Security beneficiaries, many of which have little power when confronted with inflation and its destructive impact on purchasing power.
This year, a COLA of 3.2 percent was offered to beneficiaries, which was less than half of the 8.7 percent increase tacked onto benefits in 2023 as inflation wracked economies around the world. While the news from the BLS means that the COLA applied to benefits next year is likely to be smaller than that offered this year, a decrease in the CPI will provide much-needed relief to households, and in particular seniors on a fixed income, who often feel the pain of inflation more acutely as they have very few options to increase their income to regain purchasing power.
How high could the COLA reach in 2025?
Before the latest release from the BLS, the Senior Citizens League, a senior rights organization, had placed their projected 2025 COLA at 2.57 percent. Although the June CPI report showed a decrease in prices, the SCL forecasts a 2.63 percent COLA for 2025. This is up slightly from the forecasted figure released last month.
To calculate the COLA, the SSA compares the average of the CPI-W captured in July, August, and September of the current year to the same average captured last year. If the COLA were based on comparing the May figure to last year’s average for that quarter, seniors would see a rise in benefits of 2.3 percent. Since July is the first of the three months used in the calculation, the forecasts will begin to be a bit more accurate next month as they continue to approach the actual months that will be included in the calculation.
The 2025 COLA will be announced in October once the consumer price data for September has been tabulated.