Washington, D.C. – The annual Social Security cost-of-living adjustment (COLA) is a key feature that many retirees depend on to keep up with rising costs of living. While the official announcement for next year’s COLA is set for next month, recent data released by the Bureau of Labor Statistics (BLS) is shedding light on what retirees can expect.
The COLA is determined by measuring the average increase in inflation during the third quarter, using a measure called CPI-W to calculate the adjustment in Social Security benefits. August data released by the BLS suggests that the year-over-year increase in inflation could lead to a lower COLA in 2025 compared to the 3.2% increase from last year.
Based on the current data, it is projected that retirees could see a 2.5% increase in their benefits next year. This adjustment would result in an average monthly benefit increase of $48 for the nearly $1,920 benefits paid out to retired workers last month. However, factors such as taxes and Medicare premiums may impact how much of this increase retirees will actually see in their monthly checks.
In addition to potential tax withholdings, retirees are facing the likelihood of increased Medicare Part B premiums in 2025. The projected $10.30 increase in premiums, estimated to reach $185 per month, could offset over 20% of the average benefit increase. This challenge highlights the struggle many retirees face as their Social Security checks fail to keep pace with the rising costs of core necessities like medical expenses and housing.
Looking ahead, the slow and steady inflation trends in the economy may provide some relief to retirees in the future. Historically, stable inflation has translated to increased buying power for Social Security recipients. However, with the current projections for 2025, retirees will likely have to wait until at least 2026 for any substantial relief to their financial challenges.