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Social Security COLA for 2025 forecasts adjusted down: What this means for beneficiaries

The forecasts for the 2025 Social Security COLA are being adjusted down. How will this impact benefits in next year?

Social Security Benefits: Important Dates in 2024

Each year, the Social Security Adminstration (SSA) evaluates how inflation has impacted the purchasing power of the benefits distributed by the agency using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This indicator tracks prices changes for a slightly different basket of goods and services than the more general CPI for All Urban Consumers (CPI-U). Signs that inflation is slowing are welcomed by Social Security beneficiaries, many of whom are on a fixed income and suffer greatly when prices rise rapidly. As prices of basic goods decrease, beneficiaries will see their purchasing power tick up. However, whether or not they will regain all that has been lost remains to be seen. A recent Senior Citizens League (SCL) survey found that nearly 70 percent of beneficiaries saw “household costs rise faster than the COLA last year.”

How high could the COLA reach in 2025?

To calculate the Cost-of-living Adjustment, commonly referred to as the COLA, the SSA takes the average of the CPI-W for July, August, and September for a given year and compares that figure to the number recorded over the same period the previous year. In 2023, the average for the three months was 301.236, and in May 2024, it had risen to 307.811 or 2.1 percent. There is still room for the COLA that will be applied to benefits in 2025 to increase, but it is unlikely to reach the levels seen in 2023 or 2024.

The SCL publishes a COLA forecast each year. After the BLS’ May CPI report, the group decreased its projection. While earlier this spring, the SCL estimated the 2025 COLA to reach 2.66 percent, researchers revised their estimates to 2.57 earlier this month.

When will the COLA be announced?

The SSA publishes the COLA in mid-October after the September CPI report has been released. The BLS plans to publish the report this year on Thursday, 10 October. As the CPI reports for the months included in the calculation are released, the forecasts will become more accurate, thus allowing beneficiaries to better prepare for the likely increase they will see applied to their benefits in the new year.