Based on inflation trends, The Senior Citizens League (TSCL) today adjusted its long-term 2025 Social Security cost of living adjustment forecast to 1.75%, up slightly from the 1.4% projection it released last month.
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The Senior Citizens League today adjusted its long-term 2025 Social Security cost of living adjustment forecast to 1.75%
Earlier today, the January CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) came in at 2.9%, which is higher than the inflation trends indicated last month based on December CPI-W data (more on today’s inflation data below). That led to the slight adjustment.
TSCL COLA estimates tend to change from month to month based on the most recent CPI data. This is the forecast based on data through January 2024, and the final COLA for 2025 is likely to be different from the estimates because the COLA is calculated on the average rate of inflation during the 3rd quarter (July, August and September) which is compared against the 3rd quarter from the prior year. With another eight months of data still to come, TSCL notes a lot could change. Last year, early estimates from TSCL were as low as 2.7% before getting to the eventual 3.2%.
This year’s 3.2% COLA raise was well below the last two annual increases of 8.7% and 5.9%, respectively. But the 2024 adjustment still ranks well above a 20-year average that sits slightly above 2.6%.
In its press briefing today, TSCL noted that the Congressional Budget Office recently released an estimate of the 2025 COLA in its annual Budget and Economic Outlook for 2024 to 2034. The CBO has the 2025 COLA pegged at 2.5%, using a different methodology than TSCL’s. But both estimates reveal inflation rates are expected to fall from 2023 levels, and the COLA for 2025 is expected to be lower than this year’s 3.2% raise.
According to TSCL’s 2024 Senior Survey, 73% said their household costs rose by more than 3.2% in 2023, and 38% worry that their 2024 COLA will fall short of inflation this year.
Stocks plunge Tuesday on inflation data
Stocks took a dive Tuesday after the CPI report revealed stubborn January price increases, raising concerns that the Federal Reserve will keep interest rates higher for longer than anticipated. The Dow Jones Industrial Average fell by 525 points, or 1.4%, its largest single-day drop since March 2023. The S&P 500 fell 1.4% and the Nasdaq lost 1.8%.
The CPI-U report revealed consumer prices rose 3.1% in January from a year earlier, compared to a December gain of 3.4%. That marked the lowest reading since June.
From a month earlier, overall prices were up 0.3%, and core prices were up 0.4%—more than economists expected.
“The key message from today’s CPI is that it’s slowing but less than expected. The reading supports the Fed’s decision to continue to wait for more assurance that inflation is well contained,” Dec Mullarkey, managing director at SLC Management, told Reuters.
Moody’s Analytics reports that the typical American family is spending $211 more per month than a year ago; $605 more per month than 2 years ago; and $1,020 more per month than 3 years ago. AAA reports that U.S. gas prices today average $3.22 per gallon, down from $3.42 last year at this time.
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