Stubborn inflation may boost 2025’s Social Security increase

If inflationary trends continue it could boost the Social Security cost of living adjustment - ConsumerAffairs

But a survey suggests it might not be enough to keep seniors ahead of inflation

The April Consumer Price Index (CPI) showed inflation is cooling a bit but, because of hotter-than-expected readings in the first three months of the year, it remains elevated at 3.4%.

That’s a challenge for seniors listing on a fixed income but there may be a slight silver lining. The trend so far this year suggests Social Security recipients could receive a cost of living adjustment (COLA) in January of more than 2.5%. That’s well below 2023’s near-record COLA but above the average over the last two decades.

Based on the latest inflation trend, The Senior Citizens League (TSCL) has adjusted its long-term forecast COLA to 2.66% in 2025. 

TSCL said its estimates may change monthly, relying on the latest CPI data. The final COLA for 2025 may differ from these estimates because it's computed based on the average inflation rate during the third quarter months of July, August, and September, and then compared to the same period a year prior.

So whether inflation continues to cool or moves higher again in the second half of the year will be the determining factor.

2024’s results

“For 2024, the average Social Security benefit rose by $50.00, and after subtracting $9.80 to cover Medicare Part B Premium increases, the total change in benefits came out to just $40.20 a month. With the forecast of a 2.66% COLA for 2025, it appears seniors will continue to suffer financial insecurity as much next year as they have this year,” said Shannon Benton, executive director of The Senior Citizens League.

Benton said whatever the COLA turns out to be, it might not be enough to help most recipients stay ahead of inflation. The group’s 2024 Senior Survey showed 71% of respondents highlight an increase in household costs exceeding the 3.2% COLA they received for 2023.

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