The 2025 Cola Could Be 86% Higher Than Original Estimates. Here's What That Means For You.
If you're a retiree looking toward the future, you're probably already considering how much your Social Security benefits will go up in 2025. After all, seniors saw a big benefits increase when their checks started coming this year, receiving 3.2% more per month. And the year prior, seniors got an 8.7% cost-of-living adjustment (COLA). That was the largest benefits increase since the early 1980s.
So, will next year's benefits bump compare to the raise retirees received in recent years? Originally, it didn't seem like seniors would get an impressive increase. But the most recent estimates now show the COLA could be considerably higher than originally anticipated.
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Retirees could see an 86% higher COLA than expected
The Senior Citizens League (TSCL) is a senior advocacy group that has released several projections on how big the Social Security COLA will be for 2025. The table below shows what TSCL was anticipating as it released its estimates each month.
| Month Projections Were Released | Estimate for 2024 COLA |
|---|---|
| January | 1.40% |
| February | 1.75% |
| March | 2.60% |
Data source: The Senior Citizens League.
As you can see, the projected COLA has increased dramatically since the start of this year. It's up about 86% compared to the benefits bump TSCL originally thought retirees were in line for in 2025.
Why is the COLA going to be bigger than expected?
Estimates for the Social Security increase next year have changed dramatically because original projections turned out to be wrong. "The ... long-term inflation model ... suggests the COLA for next year could drop to 1.4% -- the lowest level since 2020," Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League (TSCL) said in January.
Things haven't been going as expected though. Instead, data from the Consumer Price Index for Urban Wage Earners and Clerical workers (CPI-W) showed prices are rising faster than most experts had anticipated they would in 2024. And that's a big deal because the Social Security COLA is based on what CPI-W data shows.
CPI-W measures year-over-year price growth on a basket of goods and services. Each year, the average third-quarter CPI-W is calculated. The COLA is then based on the average cost increases as shown by CPI-W in the third quarter of the year.
The most recent CPI-W data released in March 2024 revealed prices were up 3.5% year over year. Now, this could change, and likely will before the third quarter. That's why the latest projected benefits increase estimate is a 2.6% raise and not a 3.5% raise. But since experts have repeatedly said inflation would cool and that hasn't happened yet, it's not an impossibility that CPI data will show price increases are sticking close to the current 3.5% level.
Even if that's not the case, CPI-W data from the third quarter is most likely going to be low enough to see seniors only get a 1.4% raise. So, retirees can expect that they'll get a good amount of extra money in their checks again next year. Of course, the price of this bigger Social Security payment is that it's coming only because prices remain elevated and inflation continues to cost consumers.
Seniors should make sure not to get too excited about their big raise and should instead be realistic about the fact it offers them essentially no extra buying power -- it just helps them avoid losing ground.
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