Millions of seniors today rely on their monthly Social Security benefits to make ends meet. For someone without a lot of savings to fall back on, a generous Social Security cost-of-living adjustment (COLA) could spell the difference between managing their expenses in the new year or falling behind.
As of today, we don't have official word on a 2025 Social Security COLA. That information won't be released for a few more weeks, but it's important to know when that announcement is scheduled for so you can plan accordingly.
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Gear up for a big October announcement
The Social Security Administration (SSA) will announce the official 2025 COLA on Oct. 10. The reason seniors have to wait this long is that COLAs are based on third-quarter inflation data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
We already have CPI-W readings for July and August. But September's won't be available until the 10th of October -- hence the delay.
Next year's COLA could disappoint -- but it's not all bad news
Initial estimates are calling for a 2.5% Social Security COLA in 2025. That's considerably lower than the 3.2% COLA seniors received at the start of 2024.
However, it's worth noting that a 2.5% Social Security COLA has a silver lining -- it's a sign of cooling inflation. Even though Social Security benefits may not increase as much as seniors want in the new year, these recipients could enjoy a world of relief in the form of less expensive groceries, utilities, and other bills. All told, things could even out quite nicely.
That said, even once an official Social Security COLA announcement comes through, seniors won't be able to calculate a personal monthly benefit increase until Medicare announces what the standard Part B premium will be in 2025. Seniors who are enrolled in Social Security and Medicare at the same time have their Part B premiums deducted from their monthly benefits. A large Part B increase could eat away at whatever COLA comes down the pike.
Prepare to make changes
A smaller 2025 Social Security COLA may not hurt seniors as much as expected, thanks to cooling inflation. But it's not a bad idea to make changes in anticipation of a more modest raise.
If you've been struggling to cover your living costs, you may want to consider working in some capacity or reducing expenses. If you're going to take a part-time job, you may not be able to get rid of a car. But if you'd rather not work, you may be able to get by without a vehicle, which could save you a fair amount of money and stretch your 2025 COLA even further.
How to learn about next year's COLA
The SSA's news section could be a good place to visit on October 10. At that point, information should be available on next year's COLA, as well as additional aspects of the program. These include Social Security's earnings-test limit, the wage cap for Social Security taxes, and the program's maximum monthly benefit.
