On October 10, the Social Security Administration will give retirees who are already getting Social Security benefits the annual cost-of-living increase (COLA) for 2025.
The most that can be hoped for is that the COLA will help benefits keep up with inflation and keep their value.
The last three years have seen some of the biggest COLAs for seniors in ten years, thanks to very high inflation. Unfortunately, though, it is not possible that the rise in 2025 will be bigger than the one this year.
Why will the next COLA increase be lower compared to other years?
Statistics on inflation are used to figure out the COLA. Inflation started to rise in 2022 and reached some of its highest levels in forty years.
The cost of living adjustment (COLA) helped retirees some even though the cost of living went up. Take a look at how things have changed in the last ten years.
| Year | COLA increase |
| 2015 | 1.70% |
| 2016 | 0% |
| 2017 | 0.30% |
| 2018 | 2% |
| 2019 | 2.80% |
| 2020 | 1.60% |
| 2021 | 1.30% |
| 2022 | 5.90% |
| 2023 | 8.70% |
| 2024 | 3.20% |
Because prices for consumers have gone through the roof, benefits have gone up by almost 18% in the last three years. There is almost no chance, though, that the raise in 2025 will be bigger than the 3.2% COLA adjustment this year.
Inflation data used by the Social Security Administration (SSA) to figure out the COLA come from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
The CPI-W measures changes in the prices of a broad range of goods and services. It is not the same as the main inflation number that the market pays close attention to.
Every year, Social Security compares the CPI-W statistics from the third quarter of the year (July, August, and September) to the same months the previous year to figure out the COLA.
The difference is used to figure out the COLA for the next year. The CPI-W numbers for July and August have been released. The changes from the same time last year are 2.87 and 2.35 percent, respectively.
In order for the CPI-W to go above this year’s 3.2% COLA, it would have to go up a lot in September. Since interest rates have been going up for two years and inflation has been going down, this is not likely to happen.
The cost of living adjustment increase for 2025 might be disappointing for American beneficiaries
It makes sense that a bigger year-over-year COLA in 2025 is almost impossible, given where inflation has been over the last three years and the Fed’s plan to raise interest rates.
The Fed’s goal has been to slow down the rate at which prices are going up. It makes sense that the COLA will go down as inflation goes down.
It is not clear that the cost of living adjustment has kept seniors up with inflation over time, but they have really liked the recent increases in their Social Security benefits.
Prices are likely to go up less, which is good because it means that the cost of living should go down as prices rise more slowly.
Also, the most recent prediction from The Senior Citizens League (TSCL), one of the biggest neutral groups for senior citizens in the country, is that it could be as low as 2.5%.
This number will be a lot lower than the 3.2% that will start in 2024 and the 8.7% that will start in 2023 if it is passed. But even if the raise is small, it will still help people because they will have more money to fight inflation and rising costs in the US.
If this percentage is confirmed on October 10th, the following raises will be made to the average payments made to people on Social Security:
| Beneficiaries | Average monthly benefit | 2.5% increase | Extra benefit |
| Retired Workers | $1,900 | $1,948 | $48 |
| Survivors | $1,508 | $1,546 | $38 |
| Disabled people | $1,537 | $1,575 | $38 |
| SSI: Individuals | $943 | $967 | $24 |
| SSI: Couples | $1,415 | $1,450 | $35 |
Also see:-Benefits from SNAP will go up in October – It is official
