Prediction: Social Security’s cost-of-living adjustment (COLA) in 2025 will be lower than in 2024. Here’s why.

The 3.2 percent Social Security cost-of-living adjustment (COLA) for 2024 was well below the 8.7 percent boost seniors received in 2023. Although it added about $59 a month to the average benefit of Social Security, some seniors felt this did not work. quite far. Many are hoping that COLA 2025 will bring some much needed relief.

The official announcement is still a few months away, but there are good reasons to suspect that the 2025 COLA will be lower than what we’ve seen over the past two years. It’s not all bad news, though.

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Why the 2025 Social Security COLA will likely be less than 3.2%

The government doesn’t pull a Social Security COLA number out of thin air. It is based on an analysis of the change in average Q3 inflation data, measured year-on-year. It sounds more complicated than it is.

Basically, the Social Security Administration takes the Consumer Price Index for Urban Wage and Service Workers (CPI-W) numbers for July, August, and September for the current year, totals them, and divides them by three to arrive at the average. Then do the same for July, August and September of the previous year. The percentage increase between the two averages is the COLA.

Between the third quarter of 2022 and 2023, the CPI-W rose about 3.2%, so we got a COLA of 3.2% for 2024. We still have a ways to go in the third quarter of 2024, so we’ll win” I don’t know what the 2025 COLA will look like until October. But we can make some guesses based on the CPI-W numbers we’ve seen so far.

Values ​​continue to rise, but do so more slowly than in recent years. This trend looks set to continue, which could lead to a lower 2025 COLA. The Seniors League (TSCL) confirms this view, with the most recent COLA projection at just 2.63%. This would raise the average monthly retirement benefit of $1,918 to $1,968 per month – an increase of $50.

What does this mean for seniors?

It may be disappointing to hear that you won’t be getting a huge Social Security COLA next year, but there’s a clear reason. Lower COLAs mean that inflation rates are lower, so retirees may not experience much additional strain on their budgets.

When the government officially announces the COLA, you’ll be able to estimate what your checks will look like next year. The Social Security Administration will continue with personalized COLA notices in December. Once you know how much your checks will be worth in 2025, you can plan your budget for next year.

If you don’t think your Social Security benefits will go far enough, you may need to rely more on your personal savings or consider other ways to make ends meet. This could involve working part-time in retirement, reducing expenses or applying for other government benefits. It’s best to plan your strategy in advance so you know exactly what you can afford each month as you head into 2025.