The Social Security COLA Forecast for 2025 Was Just Updated. Here's the Good News and Bad News for Retirees
The Social Security COLA Forecast for 2025 Was Just Updated. Here's the Good News and Bad News for Retirees
2025 Social Security COLA Forecast Update
Inflation Impact on COLAs
The Social Security COLAs are calculated based on the inflation rate during July to September each year, specifically using the CPI-W. The 2024 COLA was 3.2%, reflecting the CPI-W increase during that period in 2023.
Projected Increase in Social Security Benefits
The Senior Citizens League has revised its 2025 COLA forecast multiple times, currently predicting a 2.7% increase. This adjustment would raise the average retiree's monthly benefit by $51, totaling an additional $612 annually.
Potential Loss of Buying Power
Despite the forecasted COLA increase, the overall CPI-W rise suggests that benefits might not keep pace with inflation, potentially leading to a decrease in real buying power for Social Security recipients in 2025.
What are the projected monthly and annual increases in benefits for the average retired worker in 2025 based on the latest COLA estimate?
Based on the latest COLA estimate of 2.7%, the average retired worker's monthly benefit is projected to increase from $1,915 in April 2024 to $1,967 in January 2025. This means the average retiree will receive an extra $51 per month (or $612 for the full year) in Social Security benefits in 2025.
How is the cost-of-living adjustment (COLA) for Social Security benefits determined annually?
The cost-of-living adjustment (COLA) for Social Security benefits is determined annually based on the inflation rate in the third quarter of each year (July through September). The specific measure used is a subset of the Consumer Price Index (CPI) known as the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which tracks a basket of prices designed to reflect what those workers spend their money on2. The COLA is calculated by comparing the average of the CPI-W for July, August, and September of the previous year with the average for the same three-month period in the current year3. The percentage change is the COLA for the following year.