Millions of older Americans receive a monthly Social Security benefit. And for many, that income is essential to covering their ongoing costs.
The good news is that each year, Social Security benefits are eligible for a cost-of-living adjustment that’s tied to inflation. And if you’re someone who relies on your monthly benefits heavily, you may be eager to know what cost-of-living adjustment (COLA) you’ll be eligible for in 2025.
Unfortunately, we don’t have that information just yet. But this month, we’ll get a lot closer to narrowing down a 2025 COLA.
September’s data is the last missing piece of the puzzle
Annual Social Security COLAs are calculated based on inflation data from July, August, and September — specifically, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). If there’s a rise in the CPI-W during the third quarter of the year from one year to the next, Social Security benefits increase. If there’s no rise in the CPI-W, benefits remain flat.
Now as of this writing, we don’t actually have CPI-W data from August yet. It takes a number of days for the Bureau of Labor Statistics to release a CPI-W reading, so the only official one we have is July’s.
But we’ll need September’s number to determine what 2025’s Social Security COLA actually amounts to. And the way inflation trends over the next 30 days will play a huge role in finalizing next year’s raise.
What 2025’s Social Security COLA looks like so far
The Social Security Administration won’t be able to announce a 2025 COLA until October. But based on preliminary data, the nonpartisan Senior Citizens League is estimating that Social Security beneficiaries will get a 2.57% raise in 2025. That’s considerably lower than the 3.2% COLA Social Security recipients got at the start of 2024.
However, that 2.57% estimate isn’t set in stone. And if inflation surges in September, next year’s COLA could shift higher.
To be clear, though, economists aren’t expecting a major surge in inflation this month. If anything, the Federal Reserve is likely to finally move forward with its first interest rate cut of 2024 due to a cooldown. And it wouldn’t be surprising if 2025’s final COLA number comes in lower than the current 2.57% projection.
That’s not necessarily a terrible thing, though. While it’s natural for seniors on Social Security to want their benefits to increase as much as possible, a smaller COLA is indicative of slowing inflation. And that right there could mean a world of financial relief for retirees on tight budgets.
It’s also worth noting that the pace of inflation in recent months is already well below the 3.2% COLA Social Security beneficiaries received at the start of 2024. So if you’re someone who manages those benefits well, you may find that you’re able to save a small portion of them in the coming months.
All told, we’re still more than a month away from getting an official 2025 Social Security COLA announcement. But we’re getting closer. And the way inflation trends in September could result in a very different number than the current working estimate.
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September Is an Important Month for Social Security. Here’s Why. was originally published by The Motley Fool
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