Inflation in the United States continues to cool, which may be good news for consumers in general (basically, every American residing in the nation). However, for Social Security beneficiaries who rely on a fixed income sent each month by the Social Security Administration (SSA), declining inflation rates have a less positive impact, and that is due to how this impacts the cost of living adjustment (COLA).
The COLA adjustment for 2025 could be the lowest in four years, according to projections from The Senior Citizen League (TSCL). The COLA for 2025 is estimated at 2.5%, which would represent a reduction compared to the adjusted 3.2% in 2024. Although this figure is lower than last year, it is close to the average of the last 20 years, which has been around 2.6%, according to historical data provided by the league.
The COLA Adjustment — When Is It Announced and When Will It Be Applied?
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), prepared by the Bureau of Labor Statistics (BLS), is the basis for calculating the COLA increase, and is published every month to track the behavior of the economy of the United States.
The Social Security cost-of-living adjustment is based on CPI-W data for the months of July, August, and September. The federal government compares this year’s third quarter inflation to last year’s inflation to determine the corresponding COLA. If current trends continue, the adjustment will be lower than in recent years. The SSA is scheduled to announce the final COLA for 2025 on October 10, once the September inflation data is published.
If the 2025 COLA remains at 2.5%, the average increase in monthly benefits for retired workers will be about $48. Currently, the average benefit for a retiree is $1,920, so with the adjustment it would rise to $1,968 as of January 2025.
Cooling Inflation Equals Barely Growing Social Security Benefits
Despite the drop in inflation rates, people who depend on Social Security, particularly retirees, continue to face difficulties. According to the 2024 Retirement Survey by TSCL, nearly 80% of senior households saw increases in their monthly expenses, primarily on food, housing, and medications. This is causing concern among many, as 65% fear that their expenses will soon exceed their income.
“Commodity costs have decreased, but the impact on seniors’ incomes remains significant,” stated a spokesperson for the Senior Citizens League. The reality is that, although overall inflation has fallen, the prices of certain essential products remain high, disproportionately affecting those living on a fixed income.
