Final 2025 Social Security COLA Estimate Drops Again

Pink piggy bank is tightened by a rope on wooden table. Illustration of the concept of budget tightening and reduction of spending

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Retirees relying on Social Security benefits can expect the lowest cost-of-living (COLA) increase since 2021. The latest COLA forecast is 2.5%, a slight decrease from last month’s estimate of 2.6%, as inflation continues to cool. The new prediction for the 2025 COLA, which comes from Kiplinger’s chief economist David Payne, is based on the inflation numbers released by the Bureau of Labor Statistics on Wednesday.

The average retiree benefit is about $1,870 each month, which means a COLA of 2.5% would translate into an increase of about $47 per month or $564 annually. This modest increase will make it difficult for seniors to keep up with the continued rising costs of energy, clothes, transportation and shelter that are responsible for driving the current inflation rate, according to Kip's investing expert Dan Burrows.

The COLA for 2025 will be reflected in Social Security checks starting in January of that year. This happens every year, although the payment may occasionally arrive a few days early due to holidays or weekends.

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When will the official be announced?

Medicare costs are not included in the CPI that’s used to calculate the COLA and that’s why some legislators want to change the way the COLA is calculated. The CPI-W is currently used and considers price inflation for working adults who are younger than 62. But some argue that using a different price index, the Consumer Price Index for the Elderly (CPI-E), could better represent what older adults actually have to spend on healthcare and other typical expenses.

Medicare costs are not factored into the COLA

Changes to the COLA are based on the CPI-W, which is a measure of price changes for a selection of goods and services, including food, energy and medical care, that is reported monthly by the federal Bureau of Labor Statistics. It is a subset of the Consumer Price Index (CPI.)

The Social Security Administration is transitioning all users who made their accounts before September 18, 2021, to the Login.gov platform. Any beneficiary who already has a Login.gov account doesn't need to take any action.

For users who do not currently use Login.gov, switching over an account can be easily done when logging into my Social Security. After logging in on the my Social Security website with your username and password as usual, users with soon-to-be outdated accounts will be given an option to transfer over to the Login.gov system. They will then need to set up a second authentication method.

Tip: Prevent fraud and identity theft by claiming your account. If criminals obtain your Social Security number, they may try to open a my Social Security account in your name and redirect your benefits to an account they control. But if you open your my Social Security account now, you can help prevent this scenario, since any individual you can only have one my Social Security account open per Social Security number.

Donna joined Kiplinger as a personal finance writer in 2023. She spent more than a decade as the contributing editor of J.K.Lasser's Your Income Tax Guide and edited state specific legal treatises at ALM Media. She has shared her expertise as a guest on Bloomberg, CNN, Fox, NPR, CNBC and many other media outlets around the nation. She is a graduate of Brooklyn Law School and the University at Buffalo.