Social Security COLA Estimate for 2025 Surges Due to Inflation – What You Need to Know

Social Security COLA Estimate for 2025 Surges Due to Inflation: An increase in next year’s Social Security cost-of-living adjustment – or COLA – could be 2.4%.

Senior Citizens League’s new prediction is based on consumer price index data released Tuesday by the U.S. Bureau of Labor Statistics. In January, the organization predicted a COLA of 1.75 percent in 2025.

As a result, inflation climbed from January to February by a bit. For the month of February, the consumer price index for urban wage earners and clerical workers (or CPI-W) — a subset of the CPI used to calculate the COLA — came in at 3.1%, which led to a slightly higher COLA estimate.

Social Security COLA Estimate for 2025 Surges Due to Inflation: How is the COLA calculated?

As a result of inflationary pressures, the Social Security Administration increases benefits every year for its roughly 70 million beneficiaries.

An increase is calculated based on the average inflation rate for the third quarter of the year, which covers July, August and September, using data from the CPI-W.

In 2024, the COLA was 3.2%, which translated into an increase of $59 a month in the average benefit for retirees, according to the Social Security Administration.

An average Social Security payment for a retired person is $1,907.

Check Out: $1,281 Monthly Stimulus: Insight on Social Security Recipients’ Payment Schedule

The cost of living is rising for older Americans

As the consumer price index for urban consumers for February indicates, inflation is still higher than the Federal Reserve’s target rate of 2%, despite cooling significantly from its 9.1% peak in the summer of 2022.

According to the Bureau of Labor Statistics, the CPI-U increased 0.4% in February, following a 0.3% increase the previous month, largely due to an increase in shelter and gasoline prices.

According to Mary Johnson, policy analyst at The Senior Citizens League, certain expenses borne by older adults are on the rise.

“Shelter, medical and transportation prices remain higher than overall inflation rate,” she says in an email.

This year’s COLA isn’t necessarily keeping older Americans up with inflation, according to a January survey by The Senior Citizens League. According to ninety-three percent of respondents, household expenses will likely outpace their raise in 2023 by more than $59 a month. Almost half of respondents said they had an increase of more than $185 in expenses last year.