Social Security Administration to release the 2025 COLA Thursday October 10, 2024
The roughly 70 million people who receive Social Security payments will soon learn how much they'll receive in their 2025 benefit checks, with the program's annual cost-of-living adjustment (COLA) to be announced within days.
Each fall, the Social Security Administration sets its annual COLA based on the recent rate of inflation, part of an overhaul to the program that began in the 1970s that ensures senior citizens and other beneficiaries aren't losing purchasing power in the face of rising prices.
According to the latest estimates, the COLA forecast is exprected to be around 2.5%, but we’ll have to wait for the Oct. 10 announcement to know for sure.
How the government calculates the Social Security COLA
The annual cost-of-living adjustment for Social Security is designed to help Social Security benefits keep up with inflation. The Social Security Administration uses a subset of the consumer price index known as the CPI-W, which measures the cost of a basket of goods and services representative of the typical spending for an urban wage earner or clerical worker.
Specifically, the SSA measures the increase in the CPI-W during the third quarter of the year compared to the previous year. That increase becomes the COLA for the following year. So, 2025's COLA will be official when the SSA receives the CPI-W reading for September on Oct. 10.
Many argue that the CPI-W isn't representative of the expenses of most seniors. That means the COLA doesn't keep pace with how much retirees are spending on goods and services each year. In fact, the Bureau of Labor Statistics created a new CPI subset called CPI-E, which measures the cost of a basket of goods that tracks the spending patterns of Americans age 62 and older. Those are the households the Social Security COLA directly affects.
Some have argued that switching the COLA to the CPI-E or some other measure more representative of the true costs retirees face will help many retired households maintain their standard of living. The Senior Citizens League says the average Social Security recipient who started benefits in 2010 has seen their purchasing power decline 20% since they received their first check.
Must Have Documents
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