In 2023, seniors on Social Security saw their benefits rise by 8.7% as one of the most generous cost-of-living adjustments, or COLAs, arrived in the midst of soaring inflation. This year's COLA, however, was far more modest, coming in at just 3.2%.
Meanwhile, next year's Social Security COLA estimates are coming in even lower so far. Recently, the nonpartisan Senior Citizens League projected that 2025's COLA would be 2.66%.
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Of course, we won't really know what next year's COLA will amount to until October. That's because COLAs are based on third quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Workers.
Since the third quarter of the year hasn't even arrived yet, it's clearly a bit premature to be making assumptions about a 2025 COLA. That's why that 2.66% projection really is just a guess, albeit an educated one based on current inflation date.
If you've been collecting Social Security for a while and loved seeing your benefits rise 8.7% at the start of last year, you may be wondering if a raise that large will ever come down the pike again. The answer is, it could -- but you don't necessarily want that.
Another 8.7% COLA is possible
Because COLAs are tied to inflation, it's more than feasible that at some point, inflation will start to soar, leading to a gigantic Social Security raise. We could even see a COLA that well exceeds 8.7% in the future, depending on economic conditions.
In fact, 8.7% is not the largest COLA Social Security has ever seen. At the start of the 1980s, when inflation was truly out of control, Social Security beneficiaries received three consecutive COLAs in the amounts of 9.9%, 14.3%, and 11.2%, respectively.
But in the context of more recent years, that 8.7% COLA definitely stands out. In 2022, Social Security recipients saw their payments rise by 5.9%. But the year before that -- 2021 -- they only got a 1.3% raise. And between 2010 and 2019, there were three years during which Social Security benefits got no COLA at all.
You don't actually want a massive COLA
If you're someone who's a salaried employee, a large raise is something you absolutely want. But if you're a recipient of Social Security, believe it or not, you shouldn't actually hope for a giant COLA year after year.
Large COLAs are simply the result of soaring inflation. So while your monthly Social Security checks may increase, chances are, you're also paying a lot more at the supermarket, pump, and just about everywhere.
To put it another way, if anything, large Social Security COLAs simply balance out faster-than-typical inflation. They don't usually help seniors gain buying power.
That's why it's really important to retire on more than just Social Security. If you have savings to tap on top of your monthly benefits, you may not need to stress quite as much when grocery and utility prices rise.
All told, it's more than possible to see another 8.7% Social Security COLA, or an even larger one than that. But it's also not really something you should hope for.
