The long-anticipated announcement is approaching.
For millions of Americans dependent on Social Security, the impending 2025 cost-of-living adjustment (COLA) is of significant interest. At the beginning of 2024, Social Security benefits experienced a 3.2% rise. There is now curiosity about whether a similar increment can be expected in the forthcoming year.
The Social Security Administration (SSA) cannot officially announce the COLA until October 10. This delay is due to the third-quarter inflation data being essential for the calculation of Social Security COLAs.
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Although the third quarter has concluded, the Bureau of Labor Statistics requires time to release the official Consumer Price Index for Urban Wage Earners and Clerical Workers reading, the index used for determining Social Security COLAs. The SSA relies on this data to calculate the 2025 adjustment.
However, it is possible to gather preliminary information about the 2025 Social Security COLA before October 10.
An initial estimate predicts a smaller increase than in 2024
Despite the absence of some crucial economic data required for the official 2025 COLA calculation, experts have developed a preliminary estimate based on available information. Currently, the projection indicates a 2.5% Social Security COLA for 2025—a noticeable decrease from the 3.2% increase at the start of 2024.
This smaller adjustment, tied to lower inflation rates, may not necessarily be negative. Reduced inflation benefits consumers across all age groups, resulting in smaller price increases. Thus, despite a reduced COLA, individuals might experience financial relief in other expenses, such as fuel and groceries.
Receiving the full 2025 COLA may vary
After the official Social Security COLA is announced, recipients can calculate their anticipated monthly benefit increase by applying the percentage to their current benefits. However, it is important to factor in potential changes in Medicare Part B premiums.
For those enrolled in both Social Security and Medicare, Part B premiums are automatically deducted from their Social Security payments. Significant increases in Part B costs in 2025 could reduce the actual COLA received.
Important updates on October 10
Besides awaiting the COLA announcement, other critical updates will be released on October 10 by the SSA, including:
- New earnings-test limits for individuals who work while collecting Social Security
- A revised wage cap determining taxable income for Social Security
- A new maximum monthly benefit
- Updated earnings requirements to qualify for Social Security benefits
Regardless of interest in the 2025 COLA, it is advisable to stay informed about these significant program changes on October 10.
