The Social Security cost-of-living adjustment, or COLA, for 2025 is likely to be 2.5%, based on the latest consumer price index data, released Wednesday.
The prospective COLA for next year would be about average for the last two decades, according to an estimate provided by the independent Social Security expert Mary Johnson, but it would still be the lowest for beneficiaries since 2021.
"The 2025 COLA will be the lowest received by Social Security beneficiaries since 2021, at the same time inflated prices persist on key essentials such as housing, meats, auto insurance, any type of service and repairs," Johnson said.
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) increased 2.4% during August from 12 months ago, down from a 2.9% increase measured in July, showing the annual rate of inflation continues to trend downward.
As a result, the COLA projection dropped again over the past month.
Beyond the effect on the COLA projection, the dip in inflation should provide additional incentive for the U.S. Federal Reserve to cut interest rates this month.
Johnson cautions that the final COLA for 2025 could be slightly 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.
