Inflation is slowing, but seniors on Social Security still feel its effects. Many have seen their expenses rise more quickly than their monthly checks and hope the 2025 cost-of-living adjustment (COLA) will bring some relief.
The latest projections show a higher COLA estimate compared to June, but you need to keep a grounded perspective about what this could mean for you. Below, we’ll take a closer look at how much the COLA estimate jumped from last month and what effect that could have on the average benefit.
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The 2025 COLA estimate has risen slightly
The latest Social Security COLA estimate for 2025 is 2.63%, up slightly from 2.57% the month before, according to the Senior Citizens League. But while some see any increase in the COLA as a good thing, there are a few points worth bearing in mind.
First, COLAs are tied to increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). When CPI-W values rise significantly, indicating high inflation, COLAs are larger, too. When inflation is lower, CPI-W values are lower, and so is the Social Security COLA. So a larger COLA will increase your checks by a larger dollar amount, but that extra money will go toward paying the higher costs of everyday items rather than to improving your quality of life.
Second, the 2025 COLA may not boost your checks as much as you’d think. If the actual COLA were 2.63%, it would raise the $1,918 average monthly benefit as of June 2024 to $1,968 — a $50 increase. That’s actually above average when looking at the last few decades of Social Security COLAs.
Bearing these factors in mind can help you maintain realistic expectations of how far the 2025 COLA will go for you, but remember that it’s not set in stone yet. The COLA may rise further or, more likely, if inflation continues to cool, we could wind up with a COLA that’s smaller than 2.63%.
The official COLA announcement is still a few months away
The Social Security Administration will announce the 2025 Social Security COLA on Oct. 10, 2024. It won’t issue personalized COLA notices until December, but you can use the COLA percentage to estimate the increase in your checks right away.
For example, if the COLA comes in at 2.6%, you’d add 2.6% to your existing checks to get an approximation of what your benefits will look like in 2025. Once you have this estimate, you can begin to plan your budget for next year.
Ideally, the boost will be enough to support your current standard of living, though some seniors find this isn’t the case.
You may have to increase withdrawals from your personal savings or supplement your Social Security benefits with income from a job or other types of government assistance, like Medicaid for healthcare costs or Supplemental Nutrition Assistance Program (SNAP) benefits for groceries. Planning for these changes in advance can help you avoid financial insecurity as we move into 2025.
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