Older adults should expect a much smaller cost-of-living raise next year as inflation trends continue to slow.
Based on January’s consumer price index report on Tuesday, Social Security’s cost-of-living-adjustment (COLA) in 2025 is forecast at 1.75%, according to analysis by The Senior Citizens League, a nonpartisan, nonprofit seniors advocacy group.
That increase would be lower than this year’s 3.2% adjustment and 2023’s 8.7%, which was the largest jump in 40 years. And it would fall short of the Congressional Budget Office’s forecast of 2.5%.
The budget office uses a different calculation than the senior citizens league, “but clearly inflation rates are expected to fall from 2023 levels and the COLA for 2025 to be lower as well,” said Mary Johnson, the league’s Social Security and Medicare policy analyst who does these calculations each month.
“My estimates change month to month based on the most recent CPI data,” she said. “We still have eight months of data to come in and a lot could change.”
How is COLA calculated?
The Social Security Administration bases its COLA each year on average annual increases in the consumer price index for urban wage earners and clerical workers from July through September.
The index for urban wage earners largely reflects the broad index the Labor Department releases each month, although it differs slightly. Last month, while the overall consumer price index rose 3.1%, the index for urban wage earners increased 2.9%.
