A cooldown in inflation will likely lead to a lukewarm cost-of-living adjustment for those receiving Social Security benefits.
Currently, it’s estimated that Social Security benefits could see a 2.5% so-called COLA hike in 2025. If correct, it would be the smallest cost-of-living adjustment in three years. The COLA hike was 3.2% in 2024.
The estimate is based on the latest inflation numbers for August, released on Sept. 11, and the inflation data for July. All that’s needed is the next round of inflation data for September.
The Social Security Administration releases the actual figure for the cost-of-living adjustment each year in October after more inflation data is known. The CPI for September is set to be released Oct. 10.
This year’s third-quarter inflation numbers will be compared with last year’s third quarter to get to the upcoming COLA figure.
The Consumer Price Index increased 0.2% on a seasonally adjusted basis in August, the same increase as in July, according to the U.S. Bureau of Labor Statistics. Year over year, the CPI increased 2.5% in August before seasonal adjustment.
While some might find the latest estimate disappointing, a 2.5% COLA for Social Security benefits would be considered about average, according to Mary Johnson, an independent Social Security and Medicare policy analyst.
In 2023, retirees and others saw an 8.7% COLA bump for Social Security benefits, as well as Supplemental Security Income benefits. That was the biggest inflation adjustment since 1981 when the COLA hike was 11.2%.
In 2022, the cost-of-living adjustment for Social Security benefits was 5.9%.
The cost-of-living adjustment was merely 1.3% in 2021 — making it one of the lowest increases on record since 1975 when Social Security started automatic annual cost-of-living allowances. It was 1.6% in 2020.
Next year, those who receive an average retiree benefit of $1,870 in Social Security benefits could see an extra $46.75 a month — or $561 a year. But all that money won’t hit their wallets directly.
Medicare Part B premiums will go up in 2025, as well, and the premiums will be announced later this year. It’s possible that an extra $10 a month could go toward those premiums next year.
Earlier this year, Johnson noted, the Medicare Trustees estimated that the Part B premium would be $185 per month in 2025, an increase of $10.30 from $174.70 in 2024. The Part B premium, as well as any voluntary withholdings for taxes, are automatically deducted from the monthly benefit amount by the Social Security Administration.
