Social Security COLA Falls Slightly in Updated Prediction
Seniors looking forward to a boost in their Social Security benefits may get less than previously expected, an analyst has predicted.
Independent Social Security and Medicare policy analyst Mary Johnson has forecasted the Cost of Living Adjustment (COLA) for retirement and disability benefits for 2025 will be 2.5 percent, down from a 2.57 percent estimate in August. Johnson predicted a benefit recipient receiving $1,870 per month from the Social Security Administration (SSA) would see their monthly payment rise by about $46.80 next year.
“The 2025 COLA will be the lowest received by Social Security beneficiaries since 2021, at the same time inflated prices persist on key essentials such as housing, meats, auto insurance, any type of service and repairs,” Johnson said in a statement to Newsweek. “Despite it being the lowest COLA since 2021, a 2.5 percent COLA would be considered about average.”
The official COLA announcement will be made on October 10. Benefit increases are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) rates for the third quarter of the year—July, August and September. The CPI-W tracks spending by working Americans.
The likelihood that the 2025 COLA could be higher than 2.5 percent is about 17 percent, Johnson said. The chances that it could drop lower than this is 13 percent.
How is COLA calculated?
Every year, the COLA is based on the average CPI-W in the third quarter of the current year and the average CPI-W in the same period of the previous year. If there’s an increase, that percentage is rounded to the nearest tenth of 1 percent, and that becomes the new COLA.
For 2024, benefit recipients received a 3.4 percent boost to their payments in line with the CPI-W in 2023. In 2023, a historic rise of 8.7 percent was granted to retirees and other benefit claimants because of runaway inflation caused by the the coronavirus pandemic.
More often than not, there is an annual increase in benefits, but sometimes this is not the case. In 2015, there was no change in the inflation measure between the third quarter of 2014 and 2015, so there was no increase to Social Security benefits in 2016.
Who Gets the Increase?
All SSA-administered programs are subject to the COLA increase. These include the following:
- Retirement benefits, including spouses who qualify for Social Security benefits based on their partner’s earnings
- Survivor benefits
- Supplemental Security Income
- Social Security Disability Insurance
Regardless of how much the official increase comes to, those claiming retirement payments can expect to see their benefits boosted starting in December. For those who get disability checks, new amounts are paid from January 2025 onward.