The Social Security Administration (SSA) looks at and changes the payments that Social Security recipients get based on the Cost of Living Adjustment (COLA) almost every year. This change is made to make sure that Social Security payments keep up with inflation and continue to provide a lifeline for many people who depend on the program.
The COLA affects everyone who gets benefits from Social Security. This includes retirees, widows, and people who get Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI).
The Calculation of COLA
The CPI-W, which stands for the Consumer Price Index for Urban Wage Earners and Clerical Workers, is used to figure out the change.
The SSA specifically looks at the CPI-W data from the third quarter of this year, which includes July, August, and September, and contrasts it with the CPI-W data from the same time last year. The COLA is based on the percentage increase between these two sets of data. It is then used to figure out how much Social Security to pay each person the following year.
For example, the COLA for 2024 was set at 3.2%, which was based on the inflationary trends seen in the CPI-W data from the previous year. This was lower than what we saw during the pandemic and the years after it, but it was still higher than the average adjustment over the last ten years.
For next year, however, there are still only guesses about how much the COLA might go up; the exact percentage has not been decided upon or stated yet and won’t be for at least a month.
Announcement Timeline for the 2025 COLA
The official COLA for 2025 will be released once all the appropriate CPI-W data for the third quarter (July, August, and September) has been collected and analyzed. Usually, this happens in October, after the final CPI-W numbers are released.
If past years are any indication, the 2025 COLA could be released on or around October 10th, the same day as the Bureau of Labor Statistics (BLS) Consumer Price Index report. This report will contain the finalized data needed to calculate the COLA for the next year.
As soon as the 2025 COLA is made public, it will be applied to all of the SSA’s programs, beginning in January 2025. This includes retirement benefits, SSI payouts, and many others.
Predictions for the 2025 Social Security Adjustment
While the official COLA for 2025 hasn’t been set yet, many guesses have been made based on the data that is available to help seniors get ready for what might happen.
The Senior Citizens League, a well-known nonprofit group that fights for seniors, has the latest estimate that the COLA for Social Security in 2025 could be around 2.57%. The CPI-W data from July were used to make this estimate. The data for August and September are still on their way, though.
The experts disagree on the exact numbers they think will happen, but they all agree that the rise will not be enough to cover the higher costs for seniors and other people on a fixed income. In fact, most of the expected price increases would not even cover the announced rise in Medicare fees for 2025, let alone the effect that inflation has had on the cost of food, gas, and rent.
According to some, the COLAs we’ve seen over the past few years haven’t even come close to closing the gap between income and costs. This has put a lot of people in a very bad financial situation and forced many to rely on savings that are quickly running out. Even though the 2025 COLA won’t solve the problem, it might help some of the most needy groups that get benefits stay afloat for a little while longer.