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Social Security Recipients on Track to Get Smallest COLA Raise Since 2021
By Kaitlin Mulhere MONEY RESEARCH COLLECTIVE
The final cost-of-living adjustment won’t be announced until October.
Social Security payments are on track to get a 2.5% bump next year, thanks to an annual cost-of-living adjustment.
The new prediction for the 2025 COLA, which comes from The Senior Citizens League, is based on the inflation numbers released by the Bureau of Labor Statistics on Wednesday. The latest COLA forecast is a slight decrease from last month’s estimate of 2.57%, as inflation continues to inch down.
The final COLA won’t be announced until October, after the Social Security Administration calculates it based on the average inflation rate from July, August and September. But the league, a nonpartisan group that advocates for older adults, puts out monthly estimates in the lead-up to that calculation to help the more than 72 million Americans who rely on Social Security benefits.
Latest Social Security COLA predictions for 2025
The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, which increased 2.4% year over year in August. That metric fell from July, when it was 2.9%.
In a separate forecast, Mary Johnson, an independent Social Security and Medicare policy analyst, also pegged the COLA for next year at 2.5%, based on inflation data through August. Like the prediction from The Senior Citizens League, her estimate represents a decline from last month, when she predicted a 2.6% COLA.
Monthly fluctuations in COLA estimates are common. But given that inflation has been cooling for several months now, it’s clear now that Social Security beneficiaries will end up with a smaller annual adjustment in 2025 than they received this year, when the COLA was 3.2%.
“The 2025 COLA will be the lowest received by Social Security beneficiaries since 2021, [when] at the same time inflated prices persist on key essentials such as housing, meats, auto insurance, any type of service and repairs,” Johnson said in an email.
Still, she points out, a 2.5% COLA is in line with the long-term average.
Medicare costs don’t factor into Social Security COLA
The average retiree benefit is about $1,870, which means a COLA around 2.5% would increase the typical payment by about $47 per month.
But Social Security recipients won’t have a more precise idea of their payment amounts next year until the Medicare Part B premium is announced, according to Johnson. The Part B premium is automatically deducted from retirees’ monthly benefit.
She calculates that Medicare Part B premiums and deductibles grew at double the rate of the annual Social Security cost-of-living adjustments over the past two decades, which means health care costs have eaten up a bigger portion of retirees’ Social Security checks. Johnson’s analysis, based on Medicare data from 2005 to 2024, found that Part B premiums increased on average by 5.5% per year. That’s compared to an average annual increase of 2.6% for COLAs.
Medicare costs are not included in the consumer price index that’s currently used to calculate the COLA. That’s one major reason why some lawmakers want to change the way the COLA is calculated. The current metric used, the CPI-W, considers price inflation for working adults who are younger than 62. But some argue that using a different price index, the Consumer Price Index for the Elderly (CPI-E), could better represent what older adults actually have to spend on health care and other common expenses.
In March, the Medicare Trustees estimated that the Part B premium for 2025 would be $185 a month, up more than $10 from $174.70 a month this year. The final premium amount will be announced this fall.
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Kaitlin Mulhere is an editor at Money.com, where she oversees the website’s higher education coverage, including stories on student debt, college costs and financial aid, and the value of a college degree. She also runs Money’s annual Best Colleges ranking. In a previous role at Money, Mulhere ran the magazine’s franchise rankings, including Best Places to Live, Best Banks and Best Places to Travel. In her time at Money, she’s written about everything from the incredible costs tied to training as an Olympic figure skater to tips for women to afford freezing their eggs to fantasy football-inspired investing. Over the years, she’s participated on several panels on college topics hosted by the Education Writers Association, National Association of State Treasurers and National Press Club; and she’s talked about Money’s work in media outlets including Good Morning America, The Chronicle of Higher Education, Newsday, Great Day Washington and more. Before joining Money in 2015, Mulhere wrote about college news for Inside Higher Ed and covered local education at The Keene (N.H.) Sentinel. She’s a graduate of the University of Florida, with bachelor’s degrees in journalism and political science.