social security cola increase 2025: The Social Security Administration (SSA) is set to announce the 2025 Cost-of-Living Adjustment (COLA) on October 10, 2024. This eagerly awaited update will determine the increase in benefits for millions of Americans, including retirees, welfare beneficiaries, and workers, starting in January 2025.
Understanding the COLA: A Shield Against Inflation
The COLA is designed to counteract inflation, ensuring that Social Security benefits maintain their purchasing power as the cost of living rises. Each year, the SSA calculates the COLA by examining the Consumer Price Index for Urban Wage and Clerical Workers (CPI-W) data from the third quarter (July, August, and September) of the current year and comparing it to the same period from the previous year.
What to Expect for 2025
For 2025, the COLA is expected to be more modest than the previous two years. In 2023, beneficiaries received an 8.7 percent increase—the highest in decades—due to soaring inflation driven by corporate greed, supply chain disruptions, and skyrocketing global energy prices. However, as inflation has slowed, the COLA for 2024 was set at 3.2 percent.
This year, projections indicate an even smaller increase. The Senior Citizens League, a leading advocacy group for seniors, updated its forecast in mid-August, estimating a COLA of around 2.57 percent for 2025. This estimate reflects the current economic environment, where price growth has decelerated compared to the previous years.
The Calculation Process
The SSA’s method for calculating the COLA is straightforward but data-dependent. It uses the CPI-W figures released by the Bureau of Labor Statistics (BLS) for the months of July, August, and September. The average of these three months is compared to the same quarter from the previous year. As of July 2024, the preliminary data suggested a COLA of approximately 2.4 percent, but this number may adjust depending on the data from August and September.
Key Dates to Watch
As we approach the official announcement, several important dates will provide clues about the final COLA figure:
- September 11, 2024: The BLS will release the CPI-W data for August. This will offer forecasters a clearer picture and allow them to refine their predictions.
- October 10, 2024: The SSA will officially announce the 2025 COLA after the September CPI-W data is published by the BLS.
Preparing for the 2025 Adjustment
The upcoming COLA announcement is crucial for millions of Americans who rely on Social Security benefits to make ends meet. A smaller increase might mean that beneficiaries will need to be more strategic in their financial planning for the upcoming year. Keeping an eye on these key dates and staying informed about the final COLA figure will be essential for effective budgeting.
As the date approaches, beneficiaries and financial planners alike will be watching closely to see how the SSA’s announcement will impact Social Security payments in 2025.
