Social Security COLA for 2025: 2.5% Increase Now Predicted

Social Security Payments to Get 2.5% Bump Next Year

Social Security payments are on track to get a 2.5% bump next year, thanks to an annual cost-of-living adjustment.

New Prediction for 2025 COLA

The new prediction for the 2025 COLA, which comes from The Senior Citizens League, is based on the inflation numbers released by the Bureau of Labor Statistics on Wednesday. The latest COLA forecast is a slight decrease from last month’s estimate of 2.57%, as inflation continues to inch down.

COLA Forecast Based on Inflation Numbers

The final COLA won’t be announced until October, after the Social Security Administration calculates it based on the average inflation rate from July, August and September. But the league, a nonpartisan group that advocates for older adults, puts out monthly estimates in the lead-up to that calculation to help the more than 72 million Americans who rely on Social Security benefits.

Latest Social Security COLA Predictions for 2025

The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, which increased 2.4% year over year in August. That metric fell from July, when it was 2.9%.

Decline from Last Month’s Estimate

In a separate forecast, Mary Johnson, an independent Social Security and Medicare policy analyst, also pegged the COLA for next year at 2.5%, based on inflation data through August. Like the prediction from The Senior Citizens League, her estimate represents a decline from last month, when she predicted a 2.6% COLA.

Social Security Beneficiaries to Receive Smaller Adjustment

Monthly fluctuations in COLA estimates are common. But given that inflation has been cooling for several months now, it’s clear now that Social Security beneficiaries will end up with a smaller annual adjustment in 2025 than they received this year, when the COLA was 3.2%.

Medicare Costs Don’t Factor into Social Security COLA

The average retiree benefit is about $1,870, which means a COLA around 2.5% would increase the typical payment by about $47 per month.

Mary Johnson’s Analysis of Medicare Costs

She calculates that Medicare Part B premiums and deductibles grew at double the rate of the annual Social Security cost-of-living adjustments over the past two decades, which means health care costs have eaten up a bigger portion of retirees’ Social Security checks. Johnson’s analysis, based on Medicare data from 2005 to 2024, found that Part B premiums increased on average by 5.5% per year. That’s compared to an average annual increase of 2.6% for COLAs.

Call to Change the Way the COLA is Calculated

Medicare costs are not included in the consumer price index that’s currently used to calculate the COLA. That’s one major reason why some lawmakers want to change the way the COLA is calculated. The current metric used, the CPI-W, considers price inflation for working adults who are younger than 62. But some argue that using a different price index, the Consumer Price Index for the Elderly (CPI-E), could better represent what older adults actually have to spend on health care and other common expenses.

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