The extra money from the 2024 COLA is now history – This will be the next increase for retirees

As the second half of the year approaches, the extra money from the 2024 COLA is now history. The cost of living adjustment (COLA) is one of the most essential topics for retirees and other Social Security recipients because it affects how much their payments will increase in the coming year. Recently, the Senior Citizens League (TSCL), which is known as one of the nation’s largest nonpartisan senior groups, announced a new projection for the next COLA increase. Based on these projections, retirees will likely get a 2.57% adjustment, which certainly is not what seniors were expecting, as it is lower than the current 3.2% COLA. 

Remember that seniors will not receive firm information until October when the official 2025 COLA is expected to be confirmed. However, until now, there are several things we know about the upcoming rise in Social Security benefits that we consider important for retirees and overall beneficiaries to understand. If you qualify for retirement benefits or any other Social Security program, here are the specifics so you can have a sense of what to expect.

Retirees will see a lower COLA compared to previous years

As the year draws to a close, most experts predict that Social Security beneficiaries will receive a smaller cost-of-living adjustment in 2025 than in previous years. According to the nonprofit advocacy organization Senior Citizens League, retirees can expect a cost-of-living adjustment of about 2.57% next year. Compared to 2024, when benefits rose by 3.2%, there was a significant decrease. It is likewise less than the rise in benefits in 2022 (5.9%) and 2023 (8.7%). Retirees may be deeply disappointed to hear of a rise in reduced benefits, but since the year is halfway over, it is time to start accepting this fact.

Why should retirees and Social Security beneficiaries be informed about COLA?

Although experts can make educated guesses as to what the COLA will be in 2025, we will not know the exact amount until we have some key financial data points. A specific formula is used to calculate the cost of living adjustment, which includes the Consumer Price Index for Clerical and Urban Wage Earners (CPI-W), and they also use the third-quarter average of the CPI-W index and compare it to the third quarter of the previous year to determine how much it has changed. The difference between these figures is then used as the basis for the cost of living adjustment.

Retirees will receive a 3% cost of living adjustment (COLA) if a comparison of Q3 CPI-W data indicates that prices on a basket of goods and services have increased by 3%. Because of this, even if the third quarter of the year is just getting started and we do not yet have any pertinent data, we can forecast what the hike will look like the following year. Moreover, based on CPI-W statistics for the first half of this year, experts have projected the increase retirees are likely to receive each year. Trends and upcoming changes in the CPI can be anticipated by examining this data. The COLA is likely to be lower in the future because the data shows that prices are not rising as much as they have in recent years.

Of course, since these are the only numbers that matter, things could change depending on how the Q3 data turns out. But given that inflation is largely flat or declining through 2024, it is unlikely to spike at this point. Accordingly, retirees should begin preparing now for the reality that their 2025 cost of living adjustment (COLA) will be significantly less than what they have become accustomed to in the post-pandemic era.