The latest estimate for Social Security‘s cost-of-living adjustment (COLA) in 2025 has risen to 3% due to higher-than-expected inflation, according to new calculations reported on Wednesday. This increase marks the third adjustment this year, following the reacceleration of inflation each month in 2024. The initial estimate for the 2025 COLA was 1.75% in January, which then rose to 2.4% in February.
The consumer price index (CPI), a measure of goods and services costs, increased by 3.5% in March compared to the previous year, surpassing economists’ average forecast of 3.4%. The core rate, which excludes volatile food and energy prices, also rose by 3.8% year-over-year, exceeding predictions for 3.7%.
The COLA is based on the subset “consumer price index for urban wage earners and clerical workers” (CPI-W), which rose to 3.5% from the previous reading of 3.1%, surpassing the 3.2% COLA that Social Security recipients began receiving in January.
Mary Johnson, a retired Social Security and Medicare Policy analyst, expressed concern about the impact of this increase, stating, “That means older consumers are losing buying power.” The expenses that seniors typically incur saw significant increases, with shelter rising by 5.7% year-over-year, hospital services jumping by 7.5%, transportation services soaring by 10.7%, and electricity costs increasing by 5.0%.
COLA for 2025 rises to 3% amid surging inflation
The Social Security Administration calculates its COLA each year based on the average annual increases in the consumer price index for urban wage earners and clerical workers from July through September. This index closely mirrors the broad index released monthly by the Labor Department.
In response to these developments, individuals may consider taking steps to protect their assets, such as exploring high-yield savings accounts.
The impact of these changes on seniors and Social Security recipients is significant, and it underscores the importance of understanding the factors that contribute to COLA adjustments. As inflation continues to affect the cost of living, it becomes increasingly crucial for individuals to stay informed about economic trends and potential implications for their financial well-being.
