Recent forecasts regarding the yearly cost-of-living adjustment (COLA) for Social Security beneficiaries are raising alarms, as they continue to fall short of inflation levels. The Senior Citizens League (TSCL), a nonpartisan organization advocating for seniors, now estimates that the COLA for 2025 will be approximately 2.57%, a decline from the 3.2% adjustment seen in 2024. According to Alex Moore, a statistician specializing in Social Security and Medicare at TSCL, this figure has been adjusted down from an earlier July prediction of 2.6%.
The organization links the reduced COLA to the existing inflation rate as indicated by the Consumer Price Index (CPI) and the Federal Reserve’s interest rate. The Federal Reserve’s interest rate, recorded at 5.33% in July, is estimated to contribute about 23% to the variance in the COLA. In July, the inflation rate was reported to be 2.9%.
To determine the annual COLA, the Consumer Price Index for Urban Wage Earners (CPI-W) is utilized for the months of July, August, and September. This data is then compared to the same timeframe from the previous year to establish the adjustment.
Concerns about senior cost-of-living adjustments
The CPI-W assesses spending patterns related to various categories, including food, consumer products, housing, healthcare, and more. Although interest and inflation rates are decreasing—which suggests a lower COLA is expected—the persistent high prices of goods continue to weigh heavily on many Social Security beneficiaries. A survey conducted by TSCL involving 2,016 seniors indicated that 78% of those surveyed reported increased monthly expenses compared to the previous year.
Many seniors express anxiety about their ability to afford basic necessities relying solely on their retirement income. In 2023, the COLA represented a historic high of 8.7% before dropping to 3.2% for 2024. Should the current projection remain, it would mark the smallest COLA increment since 2020, when the adjustment was only 1.3%.
The definitive COLA for 2025 is set to be revealed in October and will become effective in January. The prospect of a potentially diminished COLA is concerning for millions of Social Security recipients who depend on these adjustments to keep pace with rising living costs.
