Inflation falling to its lowest level in three years is good news, generally speaking. But it also means Social Security recipients are likely in line for the smallest cost-of-living increase to the monthly benefit since 2021.
The 2025 cost-of-living adjustment, or COLA, is projected to come in around 2.57%, the Senior Citizens League, an advocacy group for older Americans, said on Wednesday. Down from 2.63% last month, the calculation is based on the rate of inflation, with government figures released earlier in the day showing consumer prices in July rose 2.9%, the smallest advance since March 2021.
Though it’s not yet official, as the Social Security Administration usually sets the next year’s COLA in October, a 2.57% hike would translate into a monthly increase of nearly $49, based on the current average monthly benefit of $1,900.
The new year’s COLA can be expected with most recipients’ January benefit check.
While many working Americans have seen their wages rising at a faster pace than inflation, seniors on fixed incomes are worried about depleting their savings, according to a survey of 2,016 seniors in July. More than three-quarters, or 78%, reported higher monthly budgets for basics such as housing, food and medicines compared with last year, TSCL stated.
The Social Security Administration sets its yearly COLA based on inflation during the third quarter, or from July through September. The agency takes the average inflation rate over that period from what’s known as the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, which tracks spending by working Americans.
If that inflation rate is higher than the same period a year earlier, the COLA is adjusted upward by the difference.
But some advocates and lawmakers oppose the use of the CPI-W, arguing that older Americans spend differently than younger workers. For instance, the Senior Citizens League has noted that the CPI-W assumes workers spend about 7% of their income on health care, yet older Americans can spend up to 16% or more on health costs.
