Next year’s Social Security cost-of-living adjustment — or COLA — could be 2.4%, up from a previous forecast.
The new forecast, which comes from advocacy group The Senior Citizens League, is based on February consumer price index data released Tuesday by the U.S. Bureau of Labor Statistics. In January, the organization estimated that the 2025 COLA would be 1.75%.
But inflation increased slightly from January to 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 – was 3.1% for the month of February, leading to this COLA estimate slightly higher.
What is COLA and how is it calculated?
Each year, the Social Security Administration increases benefits for its approximately 70 million beneficiaries to adjust their payments for inflation. Using CPI-W data, the increase is based on average inflation for the third quarter of the year, which covers July, August and September.
The average is then compared to that of the previous year, and the difference is the COLA. For 2024, the COLA was 3.2%, which increased retirees’ average benefit by $59 per month, according to the Social Security Administration.
The typical Social Security payment for a retiree is $1,907.
Costs are rising for older Americans
Although inflation has cooled significantly from a peak of 9.1% in the summer of 2022, the February consumer price index for all urban consumers shows it is still above the country’s 2% target rate. Federal Reserve. According to the Bureau of Labor Statistics, the CPI-U rose 0.4% in February after rising 0.3% in the previous month, mainly due to rising housing and gasoline costs.
Mary Johnson, a policy analyst for the Senior Citizens League, said some expenses faced by seniors have continued to increase.
“Prices for housing, medical care and transportation remain higher than the overall inflation rate,” he says in an email.
A January survey by the Senior Citizens League shows that this year’s COLA doesn’t necessarily help older Americans keep up with inflation. 93% of respondents said household expenses increased in 2023 by more than $59 per month, meaning costs are now likely outpacing the increase. 43% of respondents said their expenses increased by more than $185 per month last year.
The COLA for 2025 will be announced in October.
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