Next year’s Social Security COLA projection looks somewhat bleak. Is there a chance things will improve?
Millions of Americans collect Social Security on a monthly basis. Those benefits make it possible for many of them to cover their basic expenses.
Each year, Social Security benefits are eligible for an automatic cost-of-living adjustment, or COLA. The purpose of COLAs is to help beneficiaries maintain their buying power over the years as inflation makes everyday life more expensive.
In recent years, Social Security COLAs have been generous to account for rampant inflation. In 2022, benefits rose by 5.9%. While that was a giant raise in its own right, the following year, seniors on Social Security enjoyed an 8.7% COLA. Even 2024’s relatively modest 3.2% COLA was fairly large in the context of Social Security raises in the past.
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But at this point, it’s pretty clear that 2025’s Social Security COLA is not going to be a record-breaker. It would even be fair to call it a bummer for seniors. And while there’s still some wiggle room for the most recent projection to shift, a notable change for the better is unlikely.
Social Security recipients should brace for a 2.5% raise — roughly
Social Security COLAs are calculated based on third-quarter inflation data. As of now, we only have that data for the months of July and August. But based on what we know so far, the current working estimate for 2025’s Social Security COLA is 2.5%. That projection comes from the nonpartisan Senior Citizens League.
Because September’s inflation data isn’t accounted for in that number, it’s possible that Social Security’s actual 2025 COLA will end up being different. But it’s unlikely to be very different.
If inflation wiggles upward in September, 2025’s Social Security COLA may end up at 2.6% or 2.7%. If it decreases, next year’s COLA should follow suit. But all told, at this point, it’s not a bad idea for seniors to assume that 2.5% is the working number, and to adjust their financial plans accordingly.
The only way Social Security recipients are going to end up with a much larger COLA in 2025 is if inflation takes a surprising turn in the coming weeks and begins to surge out of nowhere. But that’s not something economists are expecting. Frankly, it’s not something anyone should want, either.
Soaring inflation might lead to larger Social Security COLAs. But it also leads to higher prices for consumers, including retirees on a fixed income. For this reason, a smaller 2025 COLA isn’t actually such a terrible thing, since it’s a sign that living costs aren’t rising at such a rapid pace.
Tune in on Oct. 10 for an official announcement
The Social Security Administration is expected to announce next year’s COLA on Oct. 10, along with other key changes to the program. So if you’re someone who collects benefits, that’s a date to mark on your calendar.
Until then, it’s fair to assume that your monthly Social Security checks will rise by somewhere in the ballpark of 2.5%. If that sounds like a raise you’ll struggle on, you may want to think up some strategies to ease your financial stress. These could include pursuing different gig jobs or side hustles to put extra cash in your pocket.