Here's How Much 2025's Estimated Social Security COLA Could Add to the Average Check

The government won't announce the official 2025 Social Security cost-of-living adjustment (COLA) until October. But that hasn't stopped people from speculating about it. We saw checks rise a whopping 8.7% in 2023 -- the largest increase in 40 years. But this year's COLA wasn't nearly as high.

With growing concerns about Social Security's declining buying power, many are eager to know what 2025 will bring. The latest estimates suggest the average Social Security check will only see a modest bump from the COLA. But there's reason to believe this could change between now and October.

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What do the latest Social Security COLA estimates tell us?

The latest forecast from The Senior Citizens League puts the 2025 Social Security COLA at 2.6%. That's down from the 3.2% we saw this year, and it would be the smallest increase since 2020. The table below reflects how much more the different types of Social Security beneficiaries would get from a 2.6% COLA.

Source: Social Security Administration. All numbers are rounded to the nearest dollar.

It's disappointing, especially considering that 71% of seniors reported their spending increasing more than the COLA last year. A lot of this is down to how the government calculates COLAs.

They're based on the difference in third-quarter inflation data from the Consumer Price Index for Urban Workers and Clerical Workers (CPI-W) from this year and last year. The Social Security Administration will average the numbers from July, August, and September of 2024 and compare them to the average from those months in 2023. The difference will become the 2025 COLA.

It sounds reasonable in practice, but the CPI-W only represents about 30% of the U.S. population. Even stranger, it doesn't take retired seniors into account. The Consumer Price Index for the Elderly (CPI-E) tracks these households, and it's nearly always about two-tenths of a percentage point higher than the CPI-W.

That means a 2.6% COLA would turn into a 2.8% COLA if the government used the CPI-E instead of the CPI-W. This would bump the average benefit for retired workers up another $4 to $1,985 per month. It doesn't sound like much, but The Senior Citizens League estimates that using the CPI-E to calculate COLAs would've earned the average senior close to $2,700 more between 2014 and 2024.

It's a change many seniors have been advocating for for years, but so far the government's not budging. Even so, there are signs that the 2025 COLA could be higher than current estimates suggest.

Why the 2025 COLA might be higher than 2.6%

We've already talked about how the 2025 COLA depends on third-quarter inflation data, and these estimates have changed rapidly over the past several months. Toward the end of last year, we saw inflation begin to slow. It was widely presumed that this trend would continue throughout 2024, leading to a lower COLA for 2025.

But inflation has begun gaining speed again over the last few months. That's led The Senior Citizens League to continually increase its COLA estimates. In January, it only projected a 1.4% COLA, which it bumped to 1.75%, and now to 2.6%. It's entirely possible this will happen again if inflation remains high.

This would lead to a larger COLA for Social Security beneficiaries, but it might not translate to an increase in buying power. In March, inflation was 3.5% -- 0.3% higher than the 2024 COLA. That means things are getting more expensive and Social Security checks aren't keeping up.

We can only wait and speculate until October comes. But seniors hoping to prepare for next year may want to look to other income sources to cover what Social Security doesn't. Personal savings are always helpful or you could consider part-time employment as well.