Social Security COLA Increase for 2025 Likely to Be Smaller as Inflation Slows

Price increases are slowing across the economy. While that’s good news for consumers, the timing of this rise in inflation could end up hurting seniors and other Social Security recipients when they learn their annual cost-of-living increase later this year.

According to the latest estimate from the Senior Citizens League, which regularly forecasts Social Security’s cost-of-living adjustment (COLA), Social Security recipients can expect their monthly checks to increase by 2.63%, essentially unchanged from the 2.57% forecast last month.

The Social Security Administration (SSA) calculates the annual change in the COLA by taking the average measure of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)—a slightly different version of the regular CPI—for the months of July, August, and September of a given year. It typically announces the official change in the COLA in October.

But using this methodology, Social Security recipients’ checks can start to lag behind the general pace of inflation, according to the Senior Citizens League: Price increases can occur — and decrease — at any time of year, and the COLA may not account for those changes, said Alex Moore, the organization’s Social Security and Medicare statistician and managing partner at Blacksmith Professional Services.

This is what happened in the pandemic and post-pandemic economy: Between January 2020 and December 2023, the CPI-W increased by exactly 20% — while COLA increases totaled only 19%.

According to NBC News calculations, an equivalent increase over that period would have allowed Social Security recipients to receive an additional $10 in their monthly payments by 2024.

For those on fixed incomes, every account counts: In the League’s latest member survey, 34% of retirees said they had visited a food pantry or applied for food stamps in the past 12 months.

“About 50 percent of older households rely on Social Security to avoid poverty,” Moore said.