Rosalind Evans
The Social Security cost-of-living adjustment (COLA) for 2025 is about to be announced, and millions of beneficiaries anxiously await the news. However, this year’s increase may bring some disappointment. Experts are predicting a much lower adjustment compared to the significant increases seen in recent years. Here’s what you need to know about the upcoming changes and how they might impact your benefits.
A Lower COLA in 2025?
According to Mary Johnson, an independent Social Security and Medicare analyst, the COLA for 2025 is expected to be just 2.5%. This would mark the smallest increase since 2021. For the average retired worker receiving $1,920 in benefits, this adjustment would only amount to an additional $48 per month. “Beneficiaries may be surprised by how little their checks will increase compared to the previous two years,” Johnson commented.
In contrast, Social Security recipients saw more significant increases in 2023 and 2022, when the COLA was 3.2% and a historic 8.7%, respectively. These significant adjustments were made to help offset the effects of high inflation. In 2022, inflation reached levels not seen in four decades, driving the COLA to an exceptional level.
Could the COLA Estimate Change?
While the 2.5% estimate is the current prediction, there is still a chance for change. Johnson’s calculations show a 17% chance the COLA could increase and a 13% chance it might decrease. “The final adjustment will depend on inflation data from the consumer price index,” Johnson explained. The official COLA will be announced once the latest inflation numbers are released, providing the Social Security Administration with the data needed to make the final calculation.
The Social Security COLA is based on a specific measure of inflation, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index measures the cost of goods and services for urban workers and plays a crucial role in determining the annual adjustments to benefits.
When Will the 2025 COLA Go into Effect?
Beneficiaries will see the new COLA reflected in their Social Security payments starting in January 2025. However, they can check how their benefits will change earlier by visiting their My Social Security account online or by reviewing the paper statement mailed out by the Social Security Administration in December.
While the upcoming cost-of-living adjustment for Social Security may not bring the significant boost beneficiaries have seen in recent years, it still represents a positive benefit change. With inflation rates stabilizing, the 2.5% increase, though modest, will help recipients keep pace with rising costs. Stay informed by reviewing your benefits statement and understanding how these changes might affect your financial planning.
