AARP Hearing Center
The second of three numbers the Social Security Administration (SSA) will use to determine the 2025 cost-of-living adjustment (COLA) is in, and it points to a more modest increase in monthly benefit payments next year.
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) rose by 2.4 percent in August compared to a year ago, the U.S. Bureau of Labor Statistics (BLS) reported Sept. 11. That followed a 2.9 percent increase in July.
The COLA is based on how much the CPI-W, a federal gauge of inflation, changes in July, August and September from one year to the next. The final figure for 2025 will be announced in October.
The 2024 COLA, derived from 2023 inflation data, increased monthly benefits by 3.2 percent. “Based on recent inflation figures and looking at historical data, I estimate we can expect a [2025] COLA in the low to mid 2 percent range,” says Mike Lynch, a managing director of applied insights at Hartford Funds.
Alicia Munnell, director of the Center for Retirement Research at Boston College, projected a 2025 adjustment of 2.5 percent to 2.6 percent.. “People are still not happy because prices are high,” she says, but “I think we’re working our way out of this inflation situation and the harm that it did.”
A 2.5 percent COLA would increase the average benefit for a retired worker — about $1,920 a month in August 2024 — by $48 a month starting in January 2025. The average monthly survivor benefit ($1,509 in August) would go up by a little less than $38, and the average Social Security Disability Insurance (SSDI) payment ($1,540 in August) would tick up by $38.50.
The 2024 COLA boosted benefits by $59 a month for the average retiree. The annual adjustment declined sharply last year in tandem with cooling inflation. The 2023 COLA of 8.7 percent, a byproduct of the sharp spike in consumer prices the year before, was the largest percentage increase since 1981.
“Social Security is generally the only inflation-protected source of income for seniors in retirement,” says David Certner, legislative counsel and legislative policy director for AARP. “Whether the cost of living rises significantly or by modest amounts, AARP has fought for years to protect the COLA, which helps seniors keep up with rising prices throughout their retirement years.”
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