Social Security’s 2025’s COLA Is Looking Real Bad

Social Security

The forecast for the 2025 Social Security Cost of Living Adjustments (COLAs) has been revised downward, now estimated at 2.6%, lower than both the previous 2.7% estimate and the 3.2% adjustment in 2024. This adjustment may not keep up with the current inflation rate of 3.5%, meaning retirees could find their benefits falling short. Retirees are advised to budget carefully and seek additional income sources to offset potential financial shortfalls.


Austin, today we’re delving into the latest news about Social Security Cost of Living Adjustments, or COLAs, for 2025.

Recently, there have been some significant revisions to the forecast.

Unfortunately, it doesn’t look like the best news for retirees.

So let’s just break it down so they can see exactly what’s happening with COLA in 2025.

Yeah, thanks for that intro.

So first of all, let’s just start with the current situation here.

So social security recipients receive an annual COLA or cost of living adjustment to help keep their benefits in line with inflation.

However, many retirees felt that the 3.2 percent COLA in 2024 didn’t keep up with their rising expenses.

And according to a survey by the Senior Citizens League, more than two-thirds of retirees felt that the 2024 adjustment was insufficient.

And that’s relevant as we’re starting to look forward to the 2025 COLA adjustment.

So what does that mean?

Looking at the forecast here, the 2025 COLA was initially projected to be smaller than 2024 due to waning inflation.

And recently, this projection was revised even lower due to inflation coming in lower in May.

And the latest estimates from the Senior Citizen League suggest that a 2.6% COLA for 2025 is in the cards, which is less than the prior estimate of 2.7%.

Now, to be clear, this is all just an estimate.

It is a moving target.

But as you and I know and as we’ve talked about, the most recent inflation prints came in closer to 3.5%.

So if retirees are feeling that their 2024 COLA fell short, a 2025 COLA coming in well below 3% while inflation is still 3% plus and 3.5%, it means that they’re falling further behind.

So what does this mean?

What is the impact on benefits here?

So if that COLA goes into effect, the average monthly benefit for retired workers would increase by just $50.

For spouses, it would increase $24.

For survivors, it would increase $39.

And for disabled workers, it would only increase $40.

So that smaller adjustment could be very disappointing for retirees already struggling to make ends meet and who already feel that 2024’s COLA fell short.

So as you and I have talked about, there are some calculation concerns with COLA.

So COLA is determined based on inflation changes in the third quarter using the consumer price index for urban wage earners.

That’s the CPIW.

And some critics have argued that there needs to be an elderly or retiree-specific CPI metric, which is something that has been on the table but we have not seen enough clear information that they’re going to be transitioning to that in time for this COLA adjustment calculation to land.

So what’s the future outlook here?

While there is some hope that we might eventually switch to the CPIE for calculating COLA adjustments for Social Security, we don’t expect it to happen anytime soon here.

So in the meantime, we advise retirees to budget carefully and look for additional income sources such as part-time jobs, putting money in high-yield savings accounts, or other income-producing investments like dividends to offset what looks like might be some shortfalls in 2025 and beyond.

Yeah, well, the revised 2025 Social Security COLA may not bring the relief many retirees need.

Understanding these changes can help in planning and adjusting budgets accordingly.

So stay informed out there and take proactive steps to manage your finances in these challenging times.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.