Social Security's latest COLA update: How much more will beneficiaries get next year?

With just a month to go until the official figures are released, welfare recipients are set to see the smallest cost of living increase in three years.

The most recent forecast from the nonpartisan Senior Citizens League projects the COLA to be 2.5% next year, based on a decline in consumer price data from 2% to 2.5%. A 2.5% COLA would increase the average monthly pension for retirees by $48, to $1,920.

The final COLA payment will be announced by the Social Security Administration in October and will be due in January 2025.

Although 2.5% is lower than the 3.2% that will be paid in 2023, it is not far from the historical norm, according to TSCL. The COLA has averaged about 2.6% over the past 20 years, ranging from no increase in 2008 and 2010 to highs of 14.3% in 1980. The 8.7% increase in 2022 was the highest in decades, following the 5.9% in 2021.

COLAs, designed to prevent benefits from being eroded by inflation, are determined using data from the Consumer Price Index for urban wage earners and office workers, which tracks the average price of a basket of goods. The average CPI-W for the third quarter of the previous year is compared to the third quarter of the current year, and if there is no increase, there is no COLA.

If the CPI-W increases, social security benefits also increase by the same percentage points.

Pushing for minimal COLA

Shannon Benton, executive director of TSCL, said organizations are seeking to implement an annual minimum COLA due to rising costs.

“We are committed to a minimum 3% COLA to ensure seniors have enough to feed themselves and live with dignity,” Benton said. “TSCL's research shows that about two-thirds of seniors rely on Social Security for more than half of their monthly income, and 28% rely entirely on it.”

TSCL said higher living costs are forcing older Americans to spend a larger portion of their income just to pay bills. In the group's 2024 retirement survey, 65% of seniors reported monthly expenses of at least $2,000, up 55% from 2023. Compared with 2023, more seniors are spending at least $4,000 to $6,000 per month, while fewer are getting by on $1,000 or less.

Nearly 80% of senior households in the 2024 survey said their monthly budget for essentials such as food, housing and prescription drugs had increased in the past 12 months, and 63% said they were concerned that their income would not be enough to cover these basic costs in the coming months.