In certain projections, it has been noted that the Social Security cost of living adjustment (COLA) for the year 2025 will be between 2.5% and 3%, according to the most recent inflation data. These estimates do not reach the current inflation rate, causing some concern that the COLA may not fully reflect retirees’ actual living expenses, particularly in areas such as food, housing, and medical expenses.
The final Social Security COLA for the year 2025 will be officially communicated in the month of October, and current projections mark a significant gap between inflation and the proposed adjustment. The latest projections for the Cost of Living Adjustment have been discussed. Social Security (COLA) for next year, 2025, and how the cooling of inflation could affect it.
So Far, Everything Is Just Estimates
With the publication of new data regarding inflation, a revision of the estimates for COLA increase for next year was made, and it is very important to understand what this means for beneficiaries. Looking at the data of what COLA will look like for next year, we already know that COLA is a number that is actually relevant for all those people who are retired, and as has been talked about in the past, this is a moving target, since these are all just estimates.
There is a need to state this up front, but it’s actually meaningful to see where these estimates are, because they come from professionals in this space who make a living from this, and it has a huge impact on the quality of life of retirees. Based on inflation data recently released by the federal government in May, the Social Security COLA for 2025 could range between about 2.5% and 3%, so the Senior Citizens League projects a 2.5% COLA.
Forecasts From Some Social Security Experts
Indicate that other outside analysts have forecast a slightly higher COLA, around 3%. But we do see the information that recently came out from the BLS on the Consumer Price Index, which had an increase of 3.3% in the last 12 months.
Indeed, both estimates, even with Mary Johnson’s higher estimate of a 3% COLA, are still below inflation. As has been analyzed in the past, for the year 2024, most retirees have the feeling that this was not enough to match their salary with inflation, given the unique combination of products that retirees face.
There’s the Senior Consumer Price Index that relates more to food and healthcare, which is known to make up a larger percentage of retirees’ consumption patterns. Therefore, simply using the broad-based CPI figure is often not a reflection of the reality of what retirees pay, which is why we can see these gaps and people can feel that they fall short because their actual spending is higher than the figure COLA is trying to adjust.
The COLA represents an increase in checks sent month over month. This is calculated based on the Consumer Price Index for Salaried Workers in Urban Areas and Administrative Workers (CPI-W), so as not to affect the purchasing power of the beneficiaries.