Almost every year, the Social Security Administration (SSA) examines and modifies the benefits paid to Social Security recipients based on the Cost of Living Adjustment (COLA). This adjustment ensures that the purchasing power of Social Security benefits remains consistent with inflation while also providing a lifeline to many of the program’s dependents. The COLA applies to all recipients, including retirees, survivors, and those receiving Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI).
The calculation of COLA
The technique of establishing the adjustment is closely related to the Consumer Price Index for Urban Wage Earners and Clerical Workers. The SSA reviews the CPI-W data for the third quarter of the current year—which includes July, August, and September—and compares it to the CPI-W data from the same time the prior year. The COLA is calculated using the percentage rise between these two sets of data, and it is subsequently applied to Social Security payments for the following year.
For example, the COLA for 2024 was calculated to be 3.2%, reflecting the inflationary trends observed in the previous year’s CPI-W data, which, while lower than what we saw during the pandemic and post-pandemic years, was still higher than the average adjustment over the previous decade. However, for the coming year, there are simply speculations regarding the potential COLA increase because the precise amount has not to be confirmed or publicized, and it will not be for at least a month.
Announcement Timeline for the 2025 COLA
The official COLA for 2025 will be released once the appropriate CPI-W statistics for the third quarter—July, August, and September—have been collated and reviewed, which typically occurs in October, following the release of the final CPI-W figures.
Based on historical patterns, the 2025 COLA is expected to be revealed on or around October 10th, coinciding with the release of the Bureau of Labor Statistics (BLS) Consumer Price Index report, which will include the finalized data required to calculate the COLA for the coming year.
Once the 2025 COLA is announced, it will be applied to all SSA programs, including retirement benefits and SSI payments, beginning in January 2025.
Estimates for the 2025 Social Security Adjustment
While the official COLA for 2025 has yet to be announced, numerous projections have been generated based on existing data to help seniors prepare for what may come. According to the most recent projection from The Senior Citizens League, a major nonpartisan organization that promotes for seniors, Social Security’s COLA in 2025 might be around 2.57%. This estimate is based on CPI-W data from July, although statistics for August and September are still incoming.
Although forecasts vary and are contested by experts (although by decimal points), they all agree that the increase will not be sufficient to meet the rise in expenses for those on fixed incomes, such as seniors. In fact, the majority of the expected increases would not cover the recently announced Medicare rate hike for 2025, let alone the impact of inflation on groceries, petrol prices, or housing.
The situation is so grave that, according to some, the COLAs we’ve seen in recent years haven’t gone close to closing the income-expense gap, putting many people in an extremely vulnerable fiscal position and relying on quickly dwindling savings. While the 2025 COLA will not fix the problem, it may help some of the most needy groups that receive benefits keep their heads above water for a bit longer.
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