Social Security payments are updated yearly based on the cost of living adjustment (COLA). This accounts for the impacts of inflation on important expenses like housing, groceries, and healthcare. Experts think 2025 the Social Security COLA will be 2.7 percent.
If this prediction is correct, it will be the first time in 31 years that seniors get a COLA of 2.7 percent or more for four years in a row. In the last few years, seniors have seen high COLAs. In 2022, the COLA was 5.9 percent.
It then jumped to 8.7 percent in 2023. For 2024, the COLA was 3.2 percent. The exact number for the 2025 increase is still not known.
However, current consumer price index data suggests it could be 2.7 percent. The official COLA, based on third-quarter consumer price index data, will be announced in October.
Historical pattern of COLA increases
This looks at inflation for urban wage earners and clerical workers from July to September. The COLA last reached 2.7 percent or higher for four years between 1988 and 1993.
Higher COLAs may seem like good news, but they do not always mean more buying power for seniors. The increase shows the inflation they are already dealing with.
While this increase for yet another year may feel like an additional layer of support for recipients, there’s a reason it continues to go up historically: prices for seniors across the board are significantly higher,” said Alex Beene, a financial literacy instructor at the University of Tennessee at Martin. “It’s a good thing COLA will provide more financial assistance through its payments, but it’s not a full solution to inflation.”
Seniors will likely still need to be careful with their spending to make the most of the money they get. The more significant implication of the COLA remaining higher is that the prices around seniors remain elevated,” noted Kevin Thompson, a finance expert and CEO of 9i Capital Group.
“If the cost of everything around you continues to stay high or creep higher, the net effect of the COLA has less efficacy. Seniors may be dipping into their retirement accounts and depleting savings faster.”
If Social Security achieves a 2.7 percent COLA next year, it will mark an important trend that hasn’t been seen in over thirty years.
This shows the ongoing inflationary pressures affecting senior citizens.
