The Social Security COLA Estimate for 2025 Just Increased Thanks to Inflation
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Next year’s Social Security cost-of-living-adjustment — or COLA — could be 2.4%, an increase from a previous forecast.
The new prediction, which comes from advocacy group The Senior Citizens League, is based on February consumer price index data released Tuesday by the U.S. Bureau of Labor Statistics. In January, the organization estimated the 2025 COLA would be 1.75%.
But inflation inched up a bit from January to February. The consumer price index for urban wage earners and clerical workers (or CPI-W) — a subset of the CPI that’s used to calculate the COLA — came in at 3.1% for the month of February, leading to this slightly higher COLA estimate.
What is the COLA, and how is it calculated?
Every year, the Social Security Administration increases benefits for its roughly 70 million recipients to bring their payments up to speed with inflation. Using data from the CPI-W, the increase is based on the average inflation for the third quarter of the year, which spans July, August and September.
The average is then compared to that of the previous year, and the difference is the COLA. For 2024, the COLA was 3.2%, which increased the average retiree benefit by $59 a month, according to the Social Security Administration.
The typical Social Security payment for a retired person is $1,907.
Costs are rising for older Americans
While inflation has cooled significantly from its 9.1% peak in the summer of 2022, February’s consumer price index for all urban consumers shows that it’s still above the Federal Reserve’s target 2% rate. The CPI-U increased 0.4% in February after ticking up 0.3% the previous month, mostly due to increases in the cost of shelter and gasoline, according to the Bureau of Labor Statistics.
Mary Johnson, policy analyst for The Senior Citizens League, says certain expenses borne by older adults have continued to increase.
“Shelter, medical and transportation prices remain higher than overall inflation rate,” she says in an email.
A January survey from The Senior Citizens League shows that this year’s COLA isn’t necessarily helping older Americans keep up with inflation. Ninety-three percent of respondents said their household expenses increased in 2023 by more than $59 a month, meaning their costs are likely now outpacing their raise. Forty-three percent of respondents said their expenses jumped more than $185 per month last year.
The COLA for 2025 is set to be announced in October.
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