With Inflation Rising, Social Security's COLA is Not What It Used To Be
The Social Security cost-of-living adjustment for 2025 could shrink in 2025 from this year’s 3.2% increase as inflation cools.
COLA could be 2.6% in 2025, according to Mary Johnson, an independent Social Security and Medicare analyst and former analyst with the Senior Citizens League. The new forecast compares to her forecast in July that called for a 2.7% increase.
The 2.6% increase would be the lowest COLA since 2021, but average for the past 20 years, Johnson said.
Meanwhile, the Senior Citizens League forecast that COLA could be as low as 2.57% in 2025, compared with their forecast of 2.63% last month, according to their Social Security and Medicare statistician, Alex Moore, managing partner at Blacksmith Professional Services.
The official announcement for 2025 COLA comes out in October. COLA is not a raise, but an adjustment to help keep pace with inflation.
The Consumer Price Index report released Wednesday showed inflation is mild, but housing still remains a trouble spots for the economy. The rate of inflation, as measured by the Consumer Price Index used to calculate the Social Security COLA, fell to 2.9% for July, down from 3.0% in June.
As of June, 2024, the average Social Security benefit was about $1,781, according to the Social Security Administration. A 2.6% COLA would add about $46 month to that amount. However, Medicare Part B premiums are automatically deducted from Social Security checks so recipients won’t see the full amount.
Medicare Part B premiums are projected to be about $185 a month in 2025, up from $174.70 in 2024. The official announcement on premiums will be made later this year by the Centers for Medicare and Medicaid.
Among Americans ages 65 and older, 40% rely on Social Security for half or more of their income and about 14% of recipients 65 and older depend on it for 90% or more of their income, according to AARP.
According to a July survey by the Senior Citizens League, 71% of the 2,016 seniors said that persistent high prices from inflation forcing them to deplete their savings is among their top retirement concerns.
Additionally, 78% said their monthly budget for essentials like housing, food, and medicine was higher than last year. A total of 63% worried that their retirement income will not be enough to cover the cost of essentials.
In May, a report from the Social Security and Medicare Board of Trustees warned that Social Security will be depleted by 2035. At that time, Social Security will be able to pay only 83% of benefits.
Navigating this changing landscape of Social Security benefits is difficult. You can always reach out to us for personalized guidance to ensure your financial plan stays on track.
Original Article: Social Security’s COLA seen as shrinking in 2025 to 2.6%