If you're collecting Social Security benefits, you're probably eager to see them go up from year to year. And the good news is that those benefits are eligible for an automatic cost-of-living adjustment, or COLA.
Because Social Security COLAs are based on third-quarter inflation data, it's too soon to know exactly what 2025's raise will look like. That information won't become available until October.
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But that doesn't mean we know nothing about next year's Social Security raise. Here are some points to keep in mind if you're someone who's eagerly awaiting news of an official 2025 COLA announcement.
1. It will likely be smaller than 2024's COLA
In 2024, Social Security recipients saw their benefits rise 3.2%. Based on what we know so far, it's looking like next year's raise won't be quite as high.
The most recent projection puts 2025's COLA at 2.63% , which is actually higher than estimates from earlier in the year. But remember, we need a lot more data to arrive at an official number, so it's important not to get too hung up on that 2.63% projection in case it wiggles downward.
2. It won't be the smallest COLA on record
You may be disappointed to learn that 2025's Social Security COLA is shaping up to be smaller than 2024's. But even if that COLA creeps downward toward the 2% mark, that won't make it the smallest COLA to ever come down the pike.
Believe it or not, there have been multiple occasions where Social Security recipients got a 0% COLA. That's because benefits won't increase if there's no upward shift in inflation from one year to the next.
Inflation has slowed down in 2024, but that doesn't mean it's flat or decreasing. So, seniors on Social Security should expect some sort of boost in the new year.
3. It probably won't keep pace with inflation
Regardless of what 2025's COLA amounts to, if you're on Social Security, you shouldn't expect it to do a great job of helping you maintain your buying power. That's because Social Security COLAs have long been failing seniors in that regard.
Part of that boils down to how those COLAs are calculated. They're based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). But that index doesn't accurately reflect the costs seniors tend to bear, like healthcare.
To put it another way, retirees are likely to spend their money differently from workers in urban areas. So, until the way Social Security COLAs are calculated changes, those raises may not do such a great job of keeping seniors afloat financially.
If this is something you've experienced personally, you may want to look to the gig economy for a little extra money or see whether you can reduce some expenses. The former may be easier than the latter, though.
Though seniors on Social Security will need to sit tight until October to see what their 2025 COLA is, it's not a bad thing to keep track of estimates to avoid being in the dark. Just don't get too hung up on those projections in case they end up being a bit off the mark.
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