In reference to inflation, the latest projections made for the Social Security cost of living adjustment for the year 2025, or COLA, are in the area of 2.6%, or approximately $45 per month for the average beneficiary, that figure is based on the first projections made by the advocacy group The Senior Citizens League.
These are well below the 3.2% of 2024 and well behind the already historically large 8.7% of the year 2023.
But it doesn’t come close to the lowest COLAS recipients have ever received, according to data provided by the Social Security Administration.
How Are COLA Increments Defined?
The COLA adjustments are created to prevent the purchase power from being damaged by the issue of inflation, these are determined by the data of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which tracks the average price of the basket of goods, the average CPI-W of the third quarter of the previous year is compared with the third quarter of the current year and, if there is no increase, there is no COLA.
And if an increase in CPI-W is found, Social Security benefits will increase by the same percentage points.
Some lawmakers have wanted to make a change in the way the COLA is determined.
The COLA for years of Social Security was implemented in the year 1975, before that event, beneficiaries had to wait for a special act of Congress in order to receive an increase.
What Is the Highest Cola Ever Received? Which Was the Lowest?
The 8.7% increase in 2022 was the highest since 1981, when inflation caused Social Security benefits to grow by 11.2%. The COLA of 1980 was even higher, 14.3%.
On the completely opposite side of the spectrum, three years, two of which coincided next, did not have any increase, in 2009 and 2010, as well as in 2015, citizens receiving Social Security did not receive any increase. The increase that was presented in 2016 was 0.3%.
In 2025, it is estimated that inflation will generate increases in the social Security COLA, this causes greater adjustments than planned for beneficiaries, however, it may not be the best scenario, since increased expenses can generate a decrease in earnings, causing additional and important financial challenges for beneficiaries.
It is essential to take these implications into account to ensure a sustainable balance between benefits and costs.
The Senior Citizens League, a non-partisan advocacy group, increased its prediction of the long-term cost of living adjustment (COLA) by 2025, according to this, it would go from 1.75% to 2%. This adjustment is due to the fact that the consumer price index for the month of March showed an increase of 3.5% for those who work in administrative and urban salaried.
Therefore, an increase of approximately $45 per month is expected for the regular beneficiary, coming from an increase of 2.6%. Last year, a 3.2% increase generated a monthly profit increase of about $50.
Anyway, these are just projections and it is possible that this number will change a little, but not much, as recent history shows: generally, the final COLA looks a lot like the projections made in the preceding months.A Smaller Social Security Increase Is Coming in 2025