According to Marca, The inflation that has significantly impacted Americans’ finances since the pandemic is slowly showing signs of easing. While this is positive news overall, it also brings implications for Social Security recipients who are anxiously awaiting the announcement of the 2025 Cost-of-Living Adjustment (COLA).
Understanding the Cost-of-Living Adjustment (COLA)
The Cost-of-Living Adjustment is an annual increase granted to Social Security recipients at the beginning of each year. Its purpose is to ensure that pensions and other benefits keep pace with inflation, allowing Social Security beneficiaries to maintain their purchasing power.
The Social Security Administration (SSA) determines the COLA based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This statistic, provided by the Census Bureau, reflects average increases in essential goods and services, including food, energy, and transportation.
Historical COLA Increases
In recent years, the SSA has implemented notable Social Security increases, including 1.3% in 2021, 5.9% in 2022, 8.7% in 2023, and 3.2% in 2024. With inflation cooling in recent months, there is a possibility that the COLA for 2025 could reflect a decrease.
Anticipating the 2025 COLA
The SSA reviews the CPI-W report for the third quarter of each year to calculate the COLA for the following year. This year’s increase announcement is scheduled for October 10. Civil organizations are closely monitoring the economic landscape to anticipate the annual adjustment.
The nonprofit Senior Citizens League has been adjusting its forecasts throughout the year in light of easing inflation. Their latest estimate for the 2025 COLA has dropped to 2.5%, down from the 3.2% projected in May.
Evaluating the Impact of a 2.5% Increase
Analysts believe that even a 2.5% increase would suffice to keep benefits in line with inflation. The CPI-W indicates that prices have surged a cumulative 24.6% since 2021, while the anticipated 2025 COLA would have increased Social Security benefits by 23.4% over the same period.
What to Expect in Your Social Security Check
Should the Senior Citizens League’s prediction hold true after the announcement on October 10, the 2.5% increase would mark the most modest adjustment since 2021. This increase would translate to an average rise of $48, bringing the average income for beneficiaries to $1,966.
The SSA will formally notify each recipient of their 2025 benefit amounts through mail in December. However, this information will be accessible online starting in mid-November.
