Seniors should prepare for a slight increase in their Social Security benefits next year. The anticipated cost-of-living adjustment (COLA) is projected to be 2.6%, a decrease from the 3.2% adjustment in 2024, which resulted in an increase of over $50 in the average monthly benefit. This is also significantly lower than the 8.7% boost seen two years ago.
The potential COLA adjustment is linked to a recent report from the Bureau of Labor Statistics, which indicated that consumer prices rose by 2.9% in July compared to the previous year, slightly down from a 3% rise in June. The COLA is determined by averaging inflation data for the third quarter of the year—July, August, and September—and comparing it to the previous year’s figures based on the Consumer Price Index (CPI) for urban wage earners and clerical workers.
The Social Security Administration is set to announce the official COLA for 2025 in mid-October following the release of September’s CPI data. According to Shannon Benton, executive director of the Senior Citizens League, a significantly lower adjustment is anticipated compared to 2024’s increase.
While inflation overall is declining, many costs that directly impact seniors, such as housing, electricity, and healthcare, continue to rise. These ongoing increases pose a challenge for the over 70 million retirees and disabled workers who are already struggling with high expenses. Mary Johnson, a Social Security and Medicare policy analyst, noted that essential expenses for retirees remain high, including the stable costs of electricity and housing, which can consume up to 50% of their budgets.
Historically, Social Security’s annual increases have often fallen short of keeping pace with actual living costs. For instance, while there was a 5.9% COLA increase in 2022, inflation during that time reached 7% in 2021 and 6.5% in 2022. Between 2010 and 2024, Social Security COLAs increased benefits by an average of 3.9% annually.
According to the Senior Citizens League’s 2024 Retirement Survey, nearly 50% of respondents stated they are managing for now but lack confidence in their future financial stability, with over a quarter reporting challenges in affording basic necessities. For many seniors, Social Security constitutes a significant portion of their income, with almost half relying on it for at least half of their income and about 25% depending on it for at least 90%.
With the predicted 2.6% increase, many seniors may find it difficult to make ends meet as living costs persist in rising. Benton emphasized that the projected adjustment does not align with the actual increases in living expenses, leaving many retirees struggling to maintain a reasonable standard of living.