2025 to Bring a Cost of Living Adjustment to Social Security

(DailyDig.com) – The first payment for Social Security in 2025 will reflect the cost of living adjustment (COLA). Mary Johnson, an independent Social Security policy analyst, anticipates a smaller adjustment than the previous four years.

Annual Social Security adjustments help seniors maintain their purchasing power as economic costs rise. But these adjustments are becoming less able to stay ahead of inflation from year to year, according to The Senior Citizens League (TSCL). They cite the example of 2024 COLA, which was 3.2 percent. They stated that two-thirds of the respondents claimed that the 3.2 percent COLA did not cover their expenses.

This information indicates that most Social Security recipients believe that they lost their buying power, which is the reason for the hardships faced by retired workers. Johnson’s claim that the COLA will be lower in 2025 is unlikely to affect their buying power, unless it’s worse.

Currently, the rate of inflation during the last year has weakened somewhat, but a Retirement Survey for the US in 2024 by Schroders showed that less than half of retired citizens receiving Social Security payments think that they receive enough money. Almost 90 percent worry that inflation, which causes higher prices on everything, reduces the value of the money they have in their savings.

Social Security COLAs are in response to inflation, and their formula for each year’s adjustment uses a subgroup of the Consumer Price Index, the CPI-W. It calculates the changes in prices by studying the hourly workers’ spending habits. When working people spend their money, it is not necessarily on the same things that retired workers do, such as medical or housing expenses.

Only the spending habits of workers from July through September of each year determine the COLA calculation. They divide the current year’s third quarter by the previous year’s third quarter to determine the percentage for the next COLA.

TSCL predicts the percentage for each COLA until the end of the current year’s third quarter, when they will have the data to accurately state the percentage of the next year’s COLA.