FINANCE
Relief on the Horizon: Preliminary Social Security COLA projections indicate benefit boost over 2 percent for 2025
Preliminary Social Security COLA projections suggest a higher benefit boost for 2025, potentially bringing greater financial relief to seniors in 2025.
Good news may be coming for seniors this fall, with new data allowing the forecasts for the 2025 Social Security COLA, or Cost-of-living Adjustment, to be updated. The SSA uses the Bureau of Labor Statistics Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to calculate the COLA. This index, which extends beyond city dwellers to encompass a broader population, tends to be slightly lower than the CPI for All Urban Consumers (CPI-U). Over the past year, the CPI-W has shown a 3.3 percent increase in average prices, while the CPI-U has reported an average of 3.4 percent.
In 2024, the SSA provided beneficiaries of its various programs with a COLA of 3.2 percent. This significant increase played a crucial role in boosting the average Social Security payment for a retired worker from $1,828.30 in January 2023 to $1,909.01 a year later, demonstrating the tangible impact of the COLA on individuals’ financial situations. However, the well-being of seniors remains in peril, with senior rights organizations, like the Senior Citizens League, ringing alarm bells at the rapid increase in poverty among older generations. A survey conducted by the organization found that 43 percent of seniors had seen their household expenses increase by nearly $200 in 2023, with 71 percent reporting that the rate at which their budgets had to increase exceeded the COLA offered. Over half filled financial holes by pulling from emergency savings as costs rose, mainly groceries.
How is the COLA calculated?
Understanding how the COLA is calculated can provide insight into the potential changes in your Social Security benefits. The SSA calculates the COLA by taking the average of the CPI-W for July, August, and September and compares that figure to the number recorded in October of the previous year.
2025 Social Security Forecasts
The CPI-W average for July, August, and September 2023 was 301.235. In April 2024, the figure was 307. 811, a rise of 2.18 percent. On 15 May, the Senior Citizens League confirmed that their 2025 COLA forecast remained at 2.6 percent, up from the 1.75 percent estimate released earlier this year. This means that the SCL estimates that the CPI-W will rise by 0.42 percent between May and September.
If inflation continues to increase at the rate it has in the first four months of the year, this figure could be exceeded, with the CPI-W reporting an average price increase of 0.43 percent in April.