The 3.2% 2024 Social Security cost-of-living adjustment (COLA) raised the average benefit by $59 per month. But that was little comfort to seniors, many of whom reported their expenses rising by more than $185 per month in 2023, according to The Senior Citizens League (TSCL).
Though the 2025 COLA is a ways off, it's already getting a lot of attention from those eager for some extra help. Here's when you can expect the announcement and what the COLA could look like.
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The 2025 COLA announcement is a few months away
The government calculates Social Security cost-of-living adjustments (COLAs) by looking at third-quarter inflation data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This measures how much a bundle of common goods covering everything from food to transportation costs that month.
The Social Security Administration averages the CPI-W numbers from July, August, and September of the current year and the previous year and then divides the difference by the previous year's average value to figure out the COLA. To get the 3.2% COLA for 2024, it started by averaging the relevant CPI-W data from 2022 and 2023:
| Month |
CPI-W for: |
|
|---|---|---|
|
2022 |
2023 |
|
|
July |
292.219 |
299.899 |
|
August |
291.629 |
301.551 |
|
September |
291.854 |
302.257 |
|
Q3 Total |
875.702 |
903.707 |
|
Average (rounded to nearest 0.001) |
291.901 |
301.236 |
Data source: Social Security Administration.
Then, it plugged those averages into the following formula:
(301.236-291.901) / 291.901 * 100 = 3.2%
It's going to use the same process to calculate the 2025 COLA, but it can't do that until it has the CPI-W number for September 2024. That's set to come out on Oct. 10, which is also the day the Social Security Administration will officially announce the 2025 COLA.
What to expect from the 2025 Social Security COLA
The Social Security COLA hinges on inflation. When inflation is high, COLAs are high, and when inflation is low, COLAs are too. It's why we saw a massive 8.7% increase in 2023 following a year of runaway inflation, but a much smaller 3.2% bump in 2024 as inflation was cooling off.
The earliest 2025 COLA estimates projected an even smaller 1.4% increase as inflation was expected to slow further. But that's not what we've seen over the last few months. The inflation rate is slowly creeping back up again, and so have the projections of what the 2025 COLA might bring.
TSCL, which made the initial 1.4% estimate, bumped its projection up to 1.75% in February before raising it to 2.6% with its last update in April. This puts it close to the Congressional Budget Office's own estimate of 2.5%. This would add roughly $48 to $50 to the average senior's monthly check.
The next several months are going to be critical. If inflation heats up once again, the COLA could be larger. But it's important to temper your expectations. It's not likely that the average senior will get hundreds of dollars more per month in 2025. Seniors will have to rely upon their personal savings or other retirement income sources to cover any additional expenditures that arise.
