It’s creeping up. Next year’s COLA forecast, that is.
While it’s still way too early to predict what next year’s actual Social Security cost of living adjustment will be, inflation trends so far this year have led the Senior Citizen’s League to raise its 2025 COLA outlook from 1.75% to 2.4%, based on the jump in Consumer Price Index released this morning by the Bureau of Labor Statistics. Back in January, the forecast was 1.4%.
Next COLA Update: 2025 Social Security COLA Estimate Jumps to 3%
Previous COLA Update: Early 2025 Social Security COLA Forecast Inches Up on Inflation Data
All COLA Updates: Social Security Cost of Living Adjustment (COLA)
The CPI-W, which is used to calculate the Social Security COLA, rose 3.1% over the last 12 months, and the index increased 0.7% for the month. Mary Johnson, Social Security and Medicare Policy Analyst for TSCL, said shelter, medical, and transportation prices remain higher than overall inflation rate. Increases in the index for shelter and gasoline both rose in February. Combined, these two indexes contributed over 60% of the monthly increase in the index for all items.
The national average price for a gallon of gas in the U.S. was $3.39 Tuesday morning, AAA reports. For context, the national average was $3.19 per gallon last month. Gas prices tend to rise at this time every year. Still, the current average is slightly cheaper now than at this time a year ago, the AAA says.
TSCL’s COLA estimates tend to change from month to month based on the most recent CPI data. This is the forecast based on data through February 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.
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%.
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.
The Social Security COLA for 2024 increased the average retiree benefit by $59 per month, but how well does it compare with the dollar amounts that seniors report their household budgets increased in 2023?
According to TSCL’s latest Senior Survey, they’re coming up well short. 93% of survey respondents say their household expenses increased by more than $59 per month for 2023. The majority, 43%, report their household expenses rose more than $185 per month in 2023.
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