Retirement Planning Social Security

Social Security COLA Estimate for 2025 Drops to 3%

News June 12, 2024 at 09:23 AM
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Illustration of Social Security card saying COLA: Since 1975

The Social Security cost of living adjustment, or COLA, for 2025 is likely to be 3%, based on the latest consumer price index data, released Wednesday.

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

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) rose 3.3% in May from 12 months ago. That's slightly lower than the inflation trends indicated last month based on April inflation data. As a result, the 2025 COLA projection has fallen marginally over the last month, according to an estimate provided by the independent Social Security expert Mary Johnson.

Johnson cautions that the final COLA for 2025 could be different from the current estimate. 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.

May 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 — was unchanged in May on a seasonally adjusted basis, after rising 0.3% in April.

Over the last 12 months, the all items index increased 3.3% before seasonal adjustment. More than offsetting a decline in gasoline, the index for shelter rose in May, up 0.4% for the fourth consecutive month.

The index for food increased 0.1% in May. The food away from home index rose 0.4% over the month, while the food at home index was unchanged. The energy index fell 2% over the month, led by a 3.6% decrease in the gasoline index.

The index for all items less food and energy rose 0.2% in May, after rising 0.3% the preceding month. Indexes that increased in May include shelter, medical care, used cars and trucks, and education. The indexes for airline fares, new vehicles, communication, recreation and apparel were among those that decreased over the month.

Credit: David Palmer/ALM

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