Social Security COLA 2025: A Guide to What You Need to Know

As the end of the year approaches, retirees and other Social Security beneficiaries eagerly anticipate the announcement of the annual cost-of-living adjustment (COLA). For 2023, the COLA increase was set at 8.7%, the highest in decades. However, the Social Security Administration has yet to release an estimate for 2025.

The COLA is an adjustment to Social Security benefits that is designed to help recipients keep up with the rising cost of living. The adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures the change in prices for a basket of goods and services purchased by urban wage earners and clerical workers.

In recent years, the COLA has been a welcome boost for retirees, especially in light of rising inflation. However, the adjustment has also come under fire from some who argue that it does not adequately keep pace with the actual cost of living for seniors.

For 2025, the Social Security Administration is expected to release its estimate for the COLA in the fall of 2024. The estimate will be based on the CPI-W data from the third quarter of 2024.

Factors That Could Affect the 2025 COLA

Several factors could affect the size of the 2025 COLA, including:

* The rate of inflation in the third quarter of 2024
* The performance of the stock market
* The health of the economy

What to Expect in 2025

Based on the current economic outlook, it is likely that the 2025 COLA will be smaller than the 8.7% increase for 2023. However, it is still too early to say for sure. The Social Security Administration will release its estimate for the COLA in the fall of 2024.

What You Can Do to Prepare

While you wait for the official announcement of the 2025 COLA, there are a few things you can do to prepare:

* Estimate your own COLA increase. You can use the Social Security Administration's COLA calculator to estimate how much your monthly benefit will increase by in 2025.
* Review your budget. Once you know how much your COLA increase will be, you can review your budget and adjust your spending accordingly.
* Make a plan for any additional expenses. If you expect your COLA increase to be smaller than the rate of inflation, you may need to make a plan for how you will cover any additional expenses.

The 2025 COLA is an important part of the financial planning for many retirees. By following the tips above, you can prepare for the COLA and make sure that you are financially secure in retirement.