Social Security’s 2025 COLA Poised to Reach Historic High Social Security recipients are poised to receive a significant Cost-of-Living Adjustment (COLA) in 2025, potentially reaching a level not seen in over three decades. The projected COLA, which is based on inflation, is currently estimated to be between 5.6% and 6.5%. This would be the largest COLA since 1983, when it reached 7.4%. The last time the COLA was above 6% was in 1984, when it hit 6.1%. The COLA is designed to offset the rising cost of living, ensuring that Social Security benefits keep pace with inflation. The adjustment is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures changes in the prices of goods and services commonly purchased by these individuals. Over the past year, inflation has surged significantly due to various factors, including supply chain disruptions, rising energy prices, and the ongoing COVID-19 pandemic. As a result, the CPI-W has increased at a faster pace than in recent years. If the current projections hold true, the COLA in 2025 will provide a much-needed boost to Social Security beneficiaries, many of whom rely heavily on their monthly payments. The increase will help them cover rising costs, such as housing, healthcare, and groceries. However, it’s important to note that the actual COLA amount may vary slightly from the current estimates. The Social Security Administration will announce the official COLA percentage for 2025 in October 2024. Nonetheless, the significant projected COLA is a positive development for Social Security recipients, who have faced financial challenges due to inflation. It will help them maintain their standard of living and meet their ongoing expenses.Social Security’s COLA: Ensuring Seniors’ Purchasing PowerSocial Security’s COLA: Ensuring Seniors’ Purchasing Power Social Security plays a crucial role in providing financial stability for most retired Americans, with nearly 9 out of 10 relying on it to some extent. The annual cost-of-living adjustment (COLA) is designed to protect beneficiaries from inflation by increasing their monthly benefits. COLA Calculation The COLA is calculated based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures price fluctuations for a broad range of goods and services. The average trailing-12-month change in the CPI-W from the third quarter of the current year compared to the same period in the previous year determines the COLA percentage. 2025 COLA Projection: 3% Based on current CPI-W data, independent analyst Mary Johnson projects a 3% COLA for 2025. This would mark the first time since 1993 that four consecutive COLAs have reached or exceeded 3%. Impact on Retirees An average retired worker would receive approximately $57 more per month, while those with disabilities or as survivors would see increases of about $46 and $45, respectively. Retirees Losing Purchasing Power Despite recent above-average COLAs, retirees continue to face purchasing power losses. A study by The Senior Citizens League found that while cumulative COLAs since 2000 have increased benefits by 78%, the cost of a typical retiree’s budget basket has risen by 141.4%. High Housing and Healthcare Costs Seniors spend a larger share of their budget on shelter and medical care, which are key drivers of inflation. Rising mortgage rates, rent increases, and increasing medical expenses have eroded the benefits of COLA adjustments. Conclusion The historic 3% COLA projected for 2025 may not fully offset the inflation challenges faced by retirees. Their purchasing power has declined in recent years, underscoring the need for additional support to ensure they can maintain their financial security in their later years.Social Security Cost-of-Living Adjustment Poised for Historical Increase The Social Security Administration’s (SSA) proposed 2025 Cost-of-Living Adjustment (COLA) is on track to reach an unprecedented level not witnessed in over three decades. According to the latest data from the SSA’s annual report to Congress, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is used to calculate the COLA, has risen at an accelerated rate. The projected increase of 8.9% for 2025 would surpass the current record set in 1982, when the COLA soared to 11.2%. This substantial adjustment is driven by the ongoing surge in inflation, which has been driven by factors such as supply chain disruptions, labor shortages, and geopolitical tensions. The CPI-W has been consistently elevated over the past year, with the most recent data showing a 9.1% year-over-year increase. The sizeable COLA would provide much-needed financial relief for Social Security beneficiaries, who have faced soaring living expenses in recent months. The increase would translate to an average monthly benefit hike of over $100 for the average retiree. However, it’s important to note that the projected COLA is subject to change based on future economic conditions. The SSA will release the final COLA amount in October 2024.