Social Security COLA declines slightly in updated forecast

Pensioners who were hoping for an increase in their social benefits could receive less than previously expected, an analyst predicted.

Independent Social Security and Medicare policy analyst Mary Johnson predicts that the cost-of-living adjustment (COLA) for retirement and disability benefits will be 2.5 percent in 2025, up from the 2.57 percent estimate in August. Johnson predicted that a beneficiary receiving $1,870 a month from the Social Security Administration (SSA) would see an increase of about $46.80 in their monthly payment next year.

“The 2025 COLA will be the lowest Social Security recipients have received since 2021, while at the same time prices for essential goods such as housing, meat, auto insurance, every type of service and repairs remain inflated,” Johnson said in a statement to Newsweek. “Although it is the lowest COLA since 2021, a COLA of 2.5 percent would be considered about average.”

The official COLA announcement will be made on October 10. The benefit increases are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of the year – July, August and September. The CPI-W tracks spending by working Americans.

The probability that the COLA could be higher than 2.5 percent in 2025 is about 17 percent, Johnson said, and the probability that it could be even lower is 13 percent.

How is the COLA calculated?

Each year, the COLA is based on the average CPI-W in the third quarter of the current year and the average CPI-W in the same period the previous year. If there is an increase, that percentage is rounded to the nearest tenth of 1 percent and that is the new COLA.

For 2024, benefit recipients received a 3.4 percent increase in their payments, in line with the Consumer Price Index (CPI-W) for 2023. In 2023, retirees and other benefit recipients were given a historic 8.7 percent increase due to runaway inflation caused by the coronavirus pandemic.

In most cases there is an annual benefit increase, but sometimes this is not the case. In 2015 there was no change in the inflation rate between the third quarter of 2014 and 2015, so there was no increase in social security benefits in 2016.

Who gets the raise?

All programs administered by the SSA are subject to the COLA increase. These include the following:

• Pensions, including spouses who are entitled to social security benefits based on their partner's income
• Survivor benefits
• Supplementary security income
• Social insurance for disability

Regardless of the official increase, pensioners can expect an increase in their benefits from December. For recipients of disability benefits, new amounts will be paid from January 2025.