We’re getting closer to narrowing a Social Security COLA for 2025. Here’s what we know so far

If you’re collecting Social Security benefits, you’re probably anxious to see them grow year after year. And the good news is that these benefits are eligible for an automatic cost of living adjustment, or COLA.

Because the Social Security COLA is based on third-quarter inflation data, it’s too early to know exactly what the increase will look like in 2025. That information won’t become available until October.

Image source: Getty Images.

But that doesn’t mean we don’t know anything about next year’s Social Security raise. Here are some points to keep in mind if you are someone who is eagerly awaiting news of an official COLA 2025 announcement.

1. It will likely be lower than the 2024 COLA

In 2024, Social Security recipients saw their benefits increase by 3.2 percent. Based on what we know so far, it looks like next year’s increase won’t be as big.

The latest projection shows the 2025 COLA at 2.63%, which is actually higher than estimates at the start of the year. But remember, we need a lot more data to arrive at an official number, so it’s important not to get too hung up on that 2.63% projection in case it moves down.

2. It will not be the lowest COLA on record

You might be disappointed to learn that the 2025 Social Security COLA is shaping up to be lower than the 2024 one. But even if that COLA creeps down toward the 2% mark, that won’t make it the lowest COLA that ever went down the pike.

Believe it or not, there have been several occasions where Social Security recipients received a 0% COLA. That’s because benefits won’t increase unless there’s an upward shift in inflation from year to year.

Inflation has slowed in 2024, but that doesn’t mean it’s flat or falling. So seniors on Social Security should expect some kind of boost in the new year.

3. It probably won’t keep up with inflation

Regardless of what the 2025 COLA means, if you’re on Social Security, you shouldn’t expect it to do a great job of helping you maintain your purchasing power. This is because the Social Security COLA has long failed seniors in this regard.

Part of it comes down to how those COLAs are calculated. They are based on the Consumer Price Index for Urban Wage and Service Workers (CPI-W). But this index does not accurately reflect the costs that seniors tend to incur, such as health care.

In other words, retirees are likely to spend their money differently than workers in urban areas. So until the way Social Security COLAs are calculated changes, those increases may not do such a good job of keeping seniors financially afloat.

If this is something you’ve personally experienced, you may want to look into the gig economy for some extra cash or see if you can cut back on some expenses. The former may be easier than the latter, though.

While seniors on Social Security will have to wait until October to see what the 2025 COLA is, it’s not a bad thing to keep track of estimates to avoid being left in the dark. Just don’t get too hung up on those projections in case they end up being a little off.