SOCIAL SECURITY
Low inflation means a lower Social Security COLA: That might not be so bad for retirees
Social Security beneficiaries will likely see a lower COLA this year as inflation continues to soften. However, many still face financial challenges.
In May, the Bureau of Labor Statistics reported no increase in the Consumer Price Index (CPI), the agency’s metric for tracking inflation. This is welcome news for seniors on Social Security, who see their purchasing power disappear quickly during periods of high inflation.
Next week, the BLS will release the June report, providing another data point to forecast the Cost-of-living Adjustment (COLA) that will be applied to Social Security and other federal benefits in January 2025. This year, a 3.2 percent increase was tacked onto benefits, following a historic 8.7 percent increase offered in 2023.
For many seniors, the news that inflation is coming down benefits their short-term financial interests but not those they hold for the long term. The Senior Citizens League (SCL), a senior rights organization, published a study that found that benefits have not kept up with inflation, even though a COLA has been applied. Of the last five COLAs offered, only one, or 20 percent, outpaced inflation. In the 2010s, that figure was 40 percent, which had fallen from two decades earlier, where the 60 percent of the COLAs applied outpaced inflation. What’s the danger of the COLA falling short? “When COLAs fall short, it can leave seniors thousands of dollars behind what they expected from Social Security,” explained the SCL.
When will the COLA for 2025 be announced?
The Social Secuirty Adminstration (SSA) uses CPI data from July, August, and September to calculate the COLA. The average from those months is compared to the average from the previous year’s period. The September data becomes available in early to mid-October when the COLA is announced. The COLA decision will be published this year on Thursday, October 10, 2024.
How high is the 2025 COLA expected to be?
The SCL also publishes a COLA forecast, which puts the COLA for 2025 at 2.56 percent. The organization decreased its projection after the May CPI report. The critical numbers will come from consumer price data in July, August, and September, meaning it is still early to give a robust projection.
Nevertheless, it is extremely unlikely that a larger COLA than that offered this year will be calculated based on current pricing trends.