Millions of retirees relying on Social Security may encounter another difficult year, as preliminary forecasts suggest that the cost-of-living adjustment (COLA) for 2025 could be less than anticipated. Although inflation appears to be gaining strength in recent months, the expected increase in benefits is likely to be modest—raising worries for seniors struggling to keep up with rising costs.
The COLA is intended to assist beneficiaries in preserving their purchasing power during inflation. However, the calculations for these annual adjustments often do not accurately capture the genuine financial pressures faced by many retirees. Following a substantial 8.7% COLA in 2023—the largest in over 40 years—beneficiaries only saw a 3.2% increase in 2024. Currently, it seems that a further decrease may be forthcoming.
2025 increase might be under 3%, causing alarm
According to initial estimates from The Senior Citizens League, the COLA for 2025 could be around 2.6%, a projection that does not keep pace with the current inflation rate. This prediction emerges during a period when retirees are already under financial pressure. A recent survey by the organization revealed that over 70% of respondents noted their household expenses are increasing faster than their benefits, and more than half have resorted to using emergency savings to make ends meet.
Social Security adjustments rely on the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) measured during the third quarter. This method, while reliable, often overlooks the complete picture of inflation—especially for retirees who typically spend more on essential services such as healthcare and housing.
Soaring inflation may not lead to higher benefits
Recent economic indicators suggest that inflation is on the rise again. The CPI-W increased 2.9% in January, 3.1% in February, and reached 3.5% in March—the highest recorded rate in several months. Nonetheless, unless inflation remains elevated through July, August, and September, it’s improbable to generate a significantly larger COLA for the subsequent year.
In practical terms, if the average retired worker received $1,910.79 per month in early 2024, a 2.6% increase would amount to just around $50 more per month. Although this is not trivial, it may still fall short of meeting the actual cost of living that many retirees face.
The Social Security Administration will officially announce the 2025 COLA in October, after the third-quarter inflation data is finalized. Until then, seniors are encouraged to continue managing their budgets cautiously and preparing for a potentially disappointing adjustment. As inflation continues, many are left questioning whether the annual COLA is adequate to truly meet their needs.
