September is an important month for Social Security. Here’s why.

Millions of older Americans receive a monthly Social Security benefit. And for many, this income is essential to cover their running costs.

The good news is that each year, Social Security benefits are eligible for a cost-of-living adjustment that is tied to inflation. And if you’re someone who relies heavily on your monthly benefits, you may be anxious to know what cost-of-living adjustment (COLA) you’ll be eligible for in 2025.

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Unfortunately, we do not have this information yet. But this month, we’ll get a lot closer to narrowing down a 2025 COLA.

The September dates are the last missing piece of the puzzle

Annual Social Security COLAs are calculated based on July, August, and September inflation data — specifically, the Consumer Price Index for Urban Wage and Service Workers (CPI-W). If there is an increase in the CPI-W in the third quarter of the year from one year to the next, social security benefits increase. If there is no increase in IPC-W, benefits remain constant.

Now, at the time of writing, we do not yet have August CPI-W data. It takes a number of days for the Bureau of Labor Statistics to release a CPI-W reading, so the only official one we have is July.

But we’ll need September’s number to determine what the 2025 Social Security COLA actually amounts to. And how inflation trends over the next 30 days will play a big role in finalizing next year’s increase.

What the Social Security COLA looks like from 2025 to now

The Social Security Administration will not be able to announce a 2025 COLA until October. But based on preliminary data, the nonpartisan League of Senior Citizens estimates that Social Security recipients will receive a 2.57 percent increase in 2025. That’s considerably less than Social Security recipients’ 3.2 percent COLA at the start of the year 2024.

However, this estimate of 2.57% is not set in stone. And if inflation picks up in September, next year’s COLA could shift higher.

To be clear, however, economists do not expect a major increase in inflation this month. In any case, the Federal Reserve is likely to finally move forward with the first interest rate cut of 2024 due to a cooling. And it wouldn’t be surprising if the final COLA number in 2025 was lower than the current projection of 2.57%.

That’s not necessarily a bad thing, though. While it’s natural for seniors on Social Security to want their benefits to grow as much as possible, a lower COLA indicates slowing inflation. And right there it could mean a world of financial help for retirees on tight budgets.

It’s also worth noting that the pace of inflation in recent months is already well below the 3.2% Social Security COLA recipients will receive in early 2024. So if you’re someone who manages these benefits well, you may find that you are able to save a small part of them in the coming months.

All told, we’re still more than a month away from getting an official Social Security 2025 COLA announcement. But we’re getting closer. And how inflation trends in September could result in a very different number than the current working estimate.