Social Security COLA Estimate for 2025: Wednesday’s calculations revealed that the most recent estimate of Social Security’s cost-of-living adjustment for 2025 increased to 3.2% following the government’s announcement that April inflation was below economists’ expectations.
The Social Security COLA estimate for 2025 has risen throughout the year due to inflation beyond the Federal Reserve’s 2% target. 1.75 percent in January, 2.4 percent in February, and 3 percent in March.
The annual price increase dropped to 3.4% in March from 3.5% in March, according to the Labor Department’s consumer price index. Spending growth dropped to 0.3% from 0.4% the month before.
CPI-W, the “consumer price index for urban wage earners and clerical workers,” underpins COLA. The percentage dropped to 3.4% from 3.5% in March, although it still exceeded the 3.2% COLA Social Security recipients began getting in January. CPI-W does not include the spending habits of retired and disabled adults, most of whom get Medicare.
According to retired Senior Citizens League policy analyst Mary Johnson, who keeps an eye on Social Security and Medicare data at the non-profit, “consumers continue to experience a decline in purchasing power.”
Seniors spend the most on transportation (11.2%), shelter (5.5%), power (5.1%), and hospitals (7.7%), according to the government.
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Wildcard for Medicare
Johnson predicted that 2025 Medicare Part B premiums would absorb most of the COLA increase.
“Medicare’s Trustees estimate that the standard Part B premium for 2025 will increase at nearly double the rate of the COLA,” the spokeswoman said.
Last Monday, the Medicare Trustees predicted a $10.30 increase in Part B monthly costs to $185.00 by 2025. This is 5.9% higher than $174.70 in 2024.
COLA does not reflect Medicare Part B premium hikes.
“Nevertheless,” he said, “Part B premiums are one of the fastest-growing costs in retirement, and they deduct those premiums directly from Social Security benefits.”
How is the COLA determined?
Social Security calculates the annual COLA using the mean annual growth rate of the CPI-W from July to September.
With slight differences, the urban wage earners index closely matches the Labor Department’s monthly-wide index.
What was the 2024 COLA?
The government raised elder Social Security recipients’ payouts by 3.2% at the start of the year to keep up with inflation. They raised the average retiree benefit by $59 per month.
Seniors Fall Behind
COLA has not lifted Social Security claimants out of poverty. 65-year-olds poverty rose from 10.7% in 2021 to 14.1% in 2022. The highest age cohort surge is in the latest Census Bureau data. More trouble is likely in 2035 when Social Security’s reserves run out.
“Congress is painting itself into a corner on fixing Social Security’s pending insolvency,” he stated. “If you don’t take prompt action, the program will automatically reduce benefits.” The Social Security Trustees predict total payouts would shrink by nearly 20% without cost-cutting or revenue-raising to match tax collections beyond 2035.
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