There was a slight increase in the outlook this week for what could be the cost of living adjustment, known as the COLA, which uses Social Security and other government benefit mechanisms to accompany inflation.
According to the most recent estimates by the nonpartisan retiree advocacy group The Senior Citizens League, the Social Security COLA’s long-term forecast is 2.66% by 2025. Although it is a slight increase compared to the 2.6% calculated in March and the 2.4% of February, it is still lower than the colas of the last three years.
It’s good news and bad news for retirees: the good news is that inflation is under control, or at least it seems to be, and the bad news is that its increase will be much smaller than the last three or four years.
The COLA adjustment is made by reading the consumer price index for salaried and clerical workers, known as CPI-W, for the month of April. This index is at 3.4% in the latest estimate, slightly below last month’s inflationary trends.
When Will the Final Cola 2025 Be Announced?
As we have said, the aforementioned figures are only preliminary estimates because there is still a lack of information. In reality, the Social Security administration is based on the average inflation rate of the third quarter of the year, that is, the months of July, August and September, and then they compare with the same period of the previous year to determine what the necessary adjustment is.
The last three adjustments, along with the one planned for 2024, were some of the highest in history. Well, the 2021 was not so much, just 1.3%, but the 2022 was 5.9%, and the 2023 was 8.7%.
The lowest adjustment in history was in 2016, when just 0.3% was recorded, while the highest in history was in 1980, when the incredible sum of 14.3% was adjusted. That year was impacted by the blows of the 1977 oil crisis and, in general, a decade of 1970 marked by international conflicts and by high inflation in the United States that averaged 11% per year.
The Medicare Part B Impact of the COLA Adjustment
Another important aspect to consider is the impact of Medicare Part B increases. By 2024, the average Social Security benefit increased by $50, but after reducing $9.80 to cover Medicare Part B premium increases, the net benefit increase was just $40.20 a month.
With a COLA forecast of 2.66% by 2025, it is possible that older people will continue to face the same financial insecurity next year as they did this year,” said Shannon Benton, executive director of TSCL.
And the fact is that the Senior Citizens League’s 2024 senior citizens survey showed a worrying trend: 71% of respondents said they noticed an increase in living costs that exceed the 3.2% COLA they received in 2023.
The Medicare Trustee’s report last week showed that Part B premiums are estimated to increase by $10.30 a month in 2025, reaching $185. This represents a 5.9% increase from this year’s $174.70.
