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Illustration of Social Security card saying COLA: Since 1975

Retirement Planning > Social Security

Social Security COLA Estimate for 2025 Climbs Again to 3.2%

By John Manganaro

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The Social Security cost-of-living adjustment, or COLA, for 2025 is likely to land between 2.66% and 3.2%, based on the latest consumer price index data, released Wednesday.

The 2024 cost-of-living adjustment for Social Security beneficiaries was 3.2%.

The April Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) rose 3.4% from 12 months ago. That’s slightly lower than the inflation trends indicated last month based on March inflation data. As a result, the 2025 COLA projection range has increased only marginally over the last month, according to separate estimates provided by the Senior Citizens League and the Social Security expert Mary Johnson.

Both sources caution that the final COLA for 2025 is likely to be different from their current estimates. This is because the COLA is calculated on the average rate of inflation during the third quarter, which is then compared against the third quarter a year ago.

In the league’s 2024 Senior Survey, 73% of respondents said their household costs rose by more than 3.2% in 2023; in addition, 38% are worried that their 2024 COLA will fall short of inflation experienced this year.

April Inflation Highlights

As reported by the Bureau of Labor Statistics, the Consumer Price Index for All Urban Consumers — a broader measure of inflation than the CPI-W — increased 0.3% in April on a seasonally adjusted basis, after rising 0.4% in March. Over the last 12 months, the all items index increased 3.4% before seasonal adjustment.

The index for shelter rose in April, as did the index for gasoline. Combined, these two indexes contributed over 70% of the monthly increase in the index for all items. The energy index rose 1.1% over the month, but the food index was unchanged in April. The food at home index actually declined 0.2%, while the food away from home index rose 0.3% over the month.

Social Security COLA and Medicare Costs

Johnson’s analysis also points out that the Medicare trustees have estimated that the standard Part B premium for 2025 will increase at nearly double the rate of the currently projected Social Security COLA. Specifically, on page 198 of the recent 2024 annual report, the trustees estimate the Part B premium will climb 5.9% per month in 2025, from $174.70 in 2024 to $185.00.

Johnson said the annual cost-of-living adjustment does not factor in any increase in the Medicare Part B premium, because COLAs are based on a consumer price index for working adults, i.e., the CPI-W.

“The CPI-W, in fact, excludes the spending patterns of retired and disabled adults ages 62 up — most people receiving Medicare benefits,” Johnson said. “Nevertheless, Part B premiums are one of the fastest growing costs in retirement, and those premiums are deducted directly from Social Security benefits.”

Credit: David Palmer/ALM

John Manganaro

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