Social Security COLA Estimates for 2025 Slashed to 2.6% Amid Ongoing Inflation Concerns
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Social Security Payments to Get 2.57% Bump in 2025
Social Security payments are expected to get a 2.57% bump in 2025, based on the latest inflation data.
Estimate Decreases from Last Month’s Prediction
That estimate is according to The Senior Citizens League, a nonpartisan group that issues monthly predictions for the annual cost-of-living adjustment (COLA). The new figure illustrates a decrease from last month’s estimate of 2.63% — though the estimates have remained in the same rough ballpark for the last few months.
Inflation Rate Remains Below 3%
The Labor Department reported Wednesday that overall inflation slowed in July, falling below 3% for the first time since 2021. The COLA, however, is calculated using the consumer price index for urban wage earners and clerical workers (CPI-W), which rose 2.9% year over year in July.
Latest Social Security COLA Predictions for 2025
The actual COLA won’t be announced until October, when the Social Security Administration will calculate it by comparing the average inflation rate during July, August and September of this year to the average rate from the same time period in 2023. But around 68 million Americans per month receive Social Security payments, so the COLA predictions are a closely watched figure.
Mary Johnson Predicts 2.6% COLA for 2025
Mary Johnson, an independent Social Security and Medicare policy analyst who retired earlier this year from The Senior Citizens League, says the COLA for next year could be 2.6% based on the inflation data through July. That’s a slight decrease from last month, when Johnson predicted a 2.7% COLA.
Federal Reserve Interest Rates Impact Social Security
The predictions come amid another quarter of relatively high interest rates, which the Federal Reserve has kept at elevated levels in order to tackle inflation. “Federal Reserve interest rates are important for Social Security because they are valuable for predicting future COLAs,” the TSCL said in a press release.
The Future of Social Security
As pensions go by the wayside and the cost of living continues to rise, Social Security has become an increasingly important source of income for many seniors: The SSA has previously reported that about half of people aged 65 or older live in households that receive at least half of their family income from Social Security benefits.
Social Security Trust Fund Update
But there are fears that the benefit could shrink. The program is only expected to be able to pay full benefits until 2035, according to a report published in May from the Social Security Board of Trustees, which oversees the finances of the program.
Cutting Income Taxes on Social Security Could Have Unintended Consequences
Recently, former president Donald Trump suggested cutting income taxes on Social Security to help retirees’ money go further. Johnson said in an email Wednesday that while the suggestion would likely be popular among older voters amid Trump’s presidential campaign, it could have the unintended consequence of actually worsening Social Security’s financial problems. The revenue from Social Security taxes are used to fund Social Security and Medicare benefits, so cutting those taxes could cause the program to go insolvent by 2033
