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Latest 2025 Social Security COLA forecast: Why the increase will be lower than the 2024 COLA
With the July Consumer Price Index in hand, we can update our forecasts for the 2025 Social Security COLA. Here is why the projected COLA is falling in 2025.
Earlier this month, the Bureau of Labor Statistics reported a 0.2 percent increase in the Consumer Price Index after average prices had fallen slightly the month before. Though prices rose last month, the 2025 cost of living increase (COLA) will likely be lower than the 3.2 percent increase offered to those receiving Social Security benefits in 2024. While the rate of price increase slowed over the last year, it continued to rise, putting pressure on Social Security beneficiaries, many of whom have little power when confronted with inflation and its destructive impact on purchasing power.
How does the Social Security Adminstration calculate the COLA?
The Social Security Adminstration (SSA) uses the CPI for Urban Wage Earners and Clerical Workers (CPI-W) to calculate the COLA and compares the third quarter average (July, August, and September) to the average from the same quarter in the previous year. Though June saw prices fall for the first time since May 2020, those decreases were erased by the July increase of 0.2 percent. The CPI-W average for the third quarter in 2023 was 301.235, and if we compare that figure to the one recorded in July 2024, average prices have risen 2.4 percent.
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.
Read more from AS USA:
How high could the COLA reach in 2025?
Before the latest BLS release, the Senior Citizens League, a senior rights organization, had projected a 2025 COLA of 2.63 percent. Although the July CPI report showed an increase in prices, the SCL adjusted down their projection to 2.57 percent.
The 2025 COLA will be announced in October once the consumer price data for September has been tabulated.