Every year, the Social Security Administration (SSA) calculates the cost-of-living adjustment (COLA) to help beneficiaries keep up with inflation and maintain their purchasing power. This adjustment isn’t guaranteed annually, but it frequently occurs to ensure seniors and other pensioners can manage their costs.
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How COLA is Calculated
COLA is based on data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index reflects the weighted categories in the broader Consumer Price Index. Specifically, COLA calculations use data from the third quarter of the current year (July, August, and September). The data from this period is compared to the same period from the previous year to determine the percentage increase in Social Security payments.
Current Predictions for 2025 COLA
Although the official COLA for 2025 won’t be announced until October, various organizations have already made predictions based on existing data. These estimates vary and evolve as new data becomes available, reflecting the volatile economic climate.
Expert Predictions
- Federal Reserve and General Consensus
- Early predictions range between a 2.6% and 3.2% increase.
- April’s CPI report indicated a 3.4% rise, suggesting the COLA could exceed 3.2%.
- The Senior Citizens League
- This non-partisan senior group predicts a 2.66% COLA for 2025.
- Their estimates carry significant weight within the senior community.
- Social Security Administration (SSA)
- The SSA predicts an average payment increase of 2.6%.
- Current average payments for retired workers: $1,907.
- Projected payment for 2025: $1,956.
- Supplemental Security Income (SSI) projections:
- Individuals: $943 to $967.
- Couples: $1,415 to $1,451.
What This Means for 2025
Given the persistent inflation and economic instability, it’s likely that there will be a COLA increase for 2025. Here are some projected figures:
- Retired Workers:
- Current Average: $1,907
- With 2.6% Increase: $1,956
- SSI Recipients:
- Individuals: From $943 to $967
- Couples: From $1,415 to $1,451
While the exact COLA for 2025 is yet to be determined, the trend suggests a probable increase. The official announcement will come in October after analyzing the CPI-W data for July, August, and September. This adjustment will then take effect in December, impacting January payments for Social Security and SSI beneficiaries.
FAQs
What is COLA?
COLA stands for cost-of-living adjustment, a yearly increase to keep Social Security payments in line with inflation.
How is COLA calculated?
It’s based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) data from the third quarter of the year.
When will the 2025 COLA be announced?
The official announcement will be made in October 2024.
Will there definitely be a COLA increase in 2025?
It’s very likely, given the current economic conditions and inflation trends.
How much could SSI benefits increase?
With a 2.6% COLA, individual benefits could rise to $967, and couples could receive $1,451.