Social Security is a lifeline for millions of older adults, especially as it becomes more difficult to save. With costs continuing to rise and many retirees struggling with a cost-of-living crisis, these monthly checks can go a long way.
Many retirees look forward to the annual cost-of-living adjustment (COLA) from the Social Security Administration (SSA) because it usually means an increase in benefits.
The SSA won't make its official announcement until October, but there are already forecasts for what the COLA might look like for 2025 based on the data so far this year. Here's the good news and bad news about how big the raise might be.
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The COLA forecast for 2025
Although next year's COLA won't be known until October, The Senior Citizens League, a nonpartisan group, has already predicted what the adjustment could look like based on inflation data so far this year.
According to its most recent estimate (from mid-April), the group expects the 2025 COLA to be around 2.6%.
While it's impossible to know right now just how accurate that estimate is, The Senior Citizens League has a strong track record of correctly forecasting the COLA. In September of 2022 and 2023, the group correctly predicted that the following year's COLAs would be 8.7% and 3.2%, respectively.
Of course, the 2.6% prediction could change in the next six months. The COLA forecast is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), released by the Bureau of Labor Statistics, which is used to track inflation data. If inflation shifts significantly between now and October, the COLA forecast will likely change, too.
The bad news about next year's COLA
The not-so-good news about the forecast is that it's lower than what beneficiaries have been used to over the past several years. In fact, a 2.6% COLA would be the lowest since 2021.
| Year | COLA |
|---|---|
| 2021 | 1.3% |
| 2022 | 5.9% |
| 2023 | 8.7% |
| 2024 | 3.2% |
| 2025 (forecast) | 2.6% |
Source: Social Security Administration. Table by author.
The average retired worker collects around $1,913 per month from Social Security, as of March 2024. A 2.6% adjustment would amount to roughly $50 more per month.
While that extra cash can certainly help make ends meet, it's not as much as some retirees might be hoping for -- especially considering nearly half of seniors say their household expenses increased by over $185 per month in 2023, according to a survey from The Senior Citizens League.
The good news
There is a bright side to a lower COLA, however. Because the adjustment is based on inflation data, a smaller COLA means that inflation has slowed over the past year.
Slowing inflation could signal that the cost-of-living crisis is finally beginning to ease up. While a smaller raise doesn't necessarily feel like a positive, lower costs overall will generally make more of a difference to retirees than slightly larger checks each month.
It's uncertain where the 2025 COLA will officially land, but if the preliminary forecasts are correct, it's likely going to be smaller than in recent years.
