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Social Security recipients can look forward to a potential boost in benefits next year, as the annual cost-of-living adjustment (COLA)will be announced this fall. This adjustment, which has been a part of the Social Security system since 1975, aims to keep benefits in line with inflation, ensuring that retirees and other beneficiaries don't lose purchasing power over time.
The amount of the COLA can vary from year to year depending on economic conditions. For example, in 2024, beneficiaries saw a 3.2% increase, while in 2023, a historic 8.7% hike was implemented due to high inflation following the COVID-19 pandemic recovery. However, there have been years, such as 2009, 2010, and 2015, when no increase was made at all.
The official announcement for the upcoming COLA is expected in October, though the exact date hasn't been confirmed. Historically, announcements have been made around mid-October, as was the case in both 2022 and 2023.
The COLA is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index tracks changes in the prices of goods and services and is used to determine the necessary adjustment to Social Security benefits. The goal is to ensure that benefits keep up with the rising cost of living.
2025 Social Security COLA: why experts predict a higher adjustment
For 2025, projections suggest an increase in the range of 2.6% to 2.7%, but some experts believe it could be higher. "I suspect inflation will increase in the third quarter enough to bump the COLA above the projected range," one analyst stated. Factors like rising oil prices could drive this increase, as higher oil prices often lead to increased costs for a wide range of products.
However, even if the COLA ends up being higher than current projections, the increase is not expected to be significantly larger. "Retirees could be looking at a Social Security benefits increase close to 2.8% or 2.9% instead of 2.6%," the analyst added.
Regardless of the exact amount, it's crucial for beneficiaries to stay informed and plan accordingly, as the COLA plays a key role in helping them maintain their purchasing power during retirement. The official announcement in October will provide the final details on how much of an increase beneficiaries can expect.