Will the 2025 COLA for Social Security be higher than last year’s bump? Here is what the forecasts say

Each year the Social Security Administration (SSA) announces a Cost-of-living adjustment (COLA) that will be applied to the benefits it distributes to offset the impact of inflation. During times of high inflation, like the economic situation of many Social Security beneficiaries over the last year, the COLA can make a huge difference in one’s purchasing power.

The 2023 COLA reached 8.7 percent after unprecedented inflationary pressure wracked global economies. Although prices were still rising, the 20224 COLA was reduced to 3.2 percent. Persistent inflation means the COLA for 2025 may creep higher

How high could the 2025 COLA be?

Unless prices begin to fall, Social Security beneficiaries and all those who receive payments from the SSA could see a 2.6 percent bump applied to their checks next year, if current inflationary patterns are followed. This would be lower than the 2024 COLA by 0.6 percentage points, being the lowest COLA for five years.

How is the COLA calculated?

The SSA uses the Bureau of Labor Statistics Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to calculate the COLA. The CPI-W tends to be lower than the CPI for All Urban Consumers (CPI-U) because it looks beyond just those shopping in cities where the standard of living tends to be higher.

Then, the SSA takes 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. In October 2023, the CPI-W stood at 292.991, and by April, it had jumped to 297.265 (or 1.45 percent). The CPI-U, on the other hand, rose 1.65 percent.