Here’s exactly when the long-awaited 2025 Social Security cost-of-living adjustment (COLA) will be announced

For most retirees, Social Security isn’t just a check they’ll receive every month. It represents a financial foundation that many would struggle to live without.

America’s top retirement program was responsible for pushing 22.7 million people — including 16.5 million adults age 65 and older — above the federal poverty line in 2022, according to an analysis of the Center for Budget and Policy Priorities. More importantly, this critical program reduced the poverty rate for seniors to 10.2 percent from about 38.7 percent without it.

With tens of millions of Americans depending on their Social Security income in some capacity to make ends meet, no announcement is more anticipated than the annual cost-of-living adjustment (COLA) — and this disclosure much expected is getting closer.

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What exactly is the Social Security COLA and when will it be announced?

The COLA legend you always hear and read about is the mechanism the Social Security Administration (SSA) relies on to make sure beneficiaries don’t lose purchasing power from year to year.

The price of almost all the goods and services we buy changes over time. If the collective price of a basket of goods and services that retirees buy regularly increases, Social Security benefits should increase by a proportionate amount to ensure that the same amount of goods and services can be bought in the future. A cost of living adjustment is the increase meant to keep up with inflation (ie rising prices).

From the first mailed check for retired workers’ benefits in January 1940 until December 1974, COLAs were arbitrarily set by special sessions of Congress. Only 11 COLAs were passed during this period and they ranged from 7% to 77% in October 1950. This historic increase was a reflection of the lack of COLAs administered throughout the 1940s.

In 1975, SSA began relying on the Consumer Price Index for Urban Wage and Service Workers (CPI-W) as an annual measure of price changes. The CPI-W has over half a dozen major spending categories and a long list of subcategories, each with their own respective weights. These percentage weights allow the CPI-W to be reduced to a single figure each month, making clear comparisons with the previous year to determine whether prices are rising (inflation) or falling (deflation).

What might come as a surprise is that Social Security’s COLA calculation only includes readings for the 12 months ending with the third quarter (ie, July through September). If the third quarter CPI-W average for 2024 is higher than the third quarter CPI-W average in 2023, inflation has occurred and Social Security checks will increase next year.

Determining the amount of this increase is also straightforward. The year-over-year percentage increase in third-quarter average CPI-W readings, rounded to the nearest tenth of a percent, equals the next year’s COLA.

The US Bureau of Labor Statistics (BLS) is scheduled to release its September inflation report — the final piece of the puzzle needed to calculate Social Security’s COLA — on Oct. 10 at 8:30 a.m. ET. While you can use data from the BLS report to calculate the 2025 COLA yourself, the SSA will also announce the annual COLA just minutes after the September inflation report hits the news.

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Are we less than three weeks away from history or disappointment?

In addition to needing to know when this all-important announcement will be made, the program’s more than 68 million beneficiaries are likely itching to find out how much of a raise they can expect next year. In previous months, BLS inflation reports have indicated that history is being made on the COLA front.

After receiving three above-average cost-of-living adjustments of 5.9% in 2022, 8.7% in 2023, and 3.2% in 2024, projections of a COLA of 2.6% or 2.7% in 2025 would be given a moment of history. It has been 32 years since there have been four consecutive years with a COLA of at least 2.7% and 28 years since four consecutive COLAs reached 2.6% or more. Either way, it would have been a scenario not seen since the end of the 20th century.

However, this history-making COLA 2025 now seems to be a distant memory. Following August’s inflation report, nonpartisan senior advocacy group The Senior Citizens League (TSCL) and independent Social Security and Medicare analyst Mary Johnson lowered their cost-of-living adjustment forecasts for 2025 to 2.5 percent.

While the difference between a 2.5% COLA in 2025 and a 2.6% or 2.7% COLA amounts to only a few dollars per month for the average beneficiary, it can result in a major disappointment for most insurance beneficiaries social.

A significant reduction in the prevailing rate of inflation caused the 2025 COLA estimates to decline. US Inflation Rate Data by YCharts.

For starters, a 2.5% COLA is very it is unlikely to offset the inflationary pressures seniors face from shelter and health care services. Retirees spend a higher percentage of their monthly budget on shelter and health care services than the average working-age American. With the trailing 12-month inflation rate for shelter more than doubling the expected 2025 COLA level, it would appear that retirees are set for another loss of purchasing power next year.

Two separate analyzes from TSCL found that reduced purchasing power is normal for seniors. According to TSCL estimates, the purchasing power of a Social Security dollar has fallen 20% since 2010 and 36% from January 2000 to February 2023.

But the biggest disappointment might just be the lack of a benefit for Social Security recipients who are also enrolled in Medicare.

Based on estimates from the Report of the Medicare Administrators, the Part B premium is expected to increase by 5.9% to $185 per month in 2025. Part B is the segment of Medicare responsible for outpatient services. This would mark the second year in a row that the premium increased by 5.9% after this declined in 2023.

Because Part B premiums are typically deducted from Medicare enrollees’ benefit checks, there’s a strong likelihood that most retired workers will see some, or perhaps all, of their 2025 COLA swallowed by this huge increase.

While there’s still a chance for a historic cost-of-living adjustment, it’s much more likely that we’re less than three weeks away from another disappointing COLA reveal.