2024 Is Half Over. Here's What We Know About the 2025 Social Security COLA So Far

The COLA is determined by third-quarter inflation data, but numbers from the first part of the year provide some clues about the raise retirees will get next year.

Retirees are most likely going to receive a cost-of-living adjustment (COLA) in 2025. COLAs increase the amount of monthly Social Security benefits in order to help ensure those benefits keep pace with inflation.

The official 2025 COLA will not be announced until October, so seniors won’t have definitive details until then. However, with 2024 half over, there’s a lot we do know about what next year’s raise will look like. Here are the details so you can get an idea of what to expect if you’re a retiree hoping to find out about next year’s raise.

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Early estimates suggest the COLA will be smaller than in recent years

With the year half over, most experts agree that Social Security retirees are going to be looking at a smaller cost-of-living adjustment in 2025 than they’ve had in recent years.

The Senior Citizens League, a nonprofit senior advocacy group, estimates that retirees can expect around a 2.57% cost-of-living adjustment next year.

That’s much lower than in 2024, when benefits increased by 3.2%. It’s also lower than in 2023, when the benefits increase was 8.7%, and 2022, when it was 5.9%.

News of a smaller benefits increase may be a big disappointment to retirees, but with the year half over, it’s important to start coming to terms with this reality.

Here’s why you need to wait to find out what 2025’s COLA will be

Although experts can speculate on what the 2025 COLA will be, we aren’t going to know the exact details until we get certain key financial data.

The cost-of-living adjustment is calculated using a specific formula. The government looks at the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). It takes an average of the CPI-W index for the third quarter of the year and sees how that average has changed compared to the third quarter of the prior year. The COLA is then based on the difference between those numbers.

If comparing Q3 CPI-W data shows prices on a basket of goods and services have increased by 3.2%, then that means retirees will get a 3.2% COLA. This is why we can make predictions for what the raise will look like next year, even though the third quarter of the year is just getting underway and we don’t have any of the relevant numbers yet.

Experts who have estimated the raise retirees are likely to see next year based their guesses on CPI-W data from the first half of this year. Looking at this data makes it possible to spot trends and to predict future changes to the Consumer Price Index. Since the numbers have been demonstrating that prices aren’t up as much this year as they were in the past few years, a smaller COLA is likely coming down the pipeline.

Of course, things could still change depending on how Q3 data shapes up, as those are the only numbers that really matter. But it’s unlikely inflation is going to surge now when it’s been mostly holding steady or declining throughout 2024. This means retirees should start bracing now for the fact that their 2025 COLA is going to be much smaller than they have gotten used to in the post-pandemic era.

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