The 2025 COLA estimates for retirees are bad

2023 was an odd year. Coming out of a pandemic and finally feeling like the world was going back to normal brought back all the usual problems of everyday life plus the ones left over by COVID, especially health wise. To help combat some of the issues, especially inflation, the cost-of-living adjustment (COLA) retirees received was an almost unprecedented increase of 8.7%, the largest in forty years.

This trend is unfortunately not likely to repeat itself any time soon, as the 2024 increase was of 3.2%, more in line with previous increases, although still higher than the average 2,7% we have seen in recent times. This increase is seeming not enough given present inflation and cost of living associated with it, and next year’s promises to be even more underwhelming.

The reality is we will not know for sure the 2025 COLA until October comes around and the math has been calculated from inflation data for the third quarter, but this hasn’t stopped experts from weighting in and making their predictions based on the currently available data. And predictions have been made.

The Senior Citizens League (TSCL), a nonprofit advocacy organization for seniors, is one of the most prolific in these predictions. Since their edict is to help seniors by fighting for the issues most relevant to them, they have taken seriously the task and are helping them figure out the consequences of their funding not being adequate, on top of fighting to increase this funding.

When looking at the data trends that would reveal the 2025 COLA, TSCL has estimated the percentage at 2.66%. and since the Social Security Administration rounds up to the nearest tenth of 1%, it is safe to assume that should predictions be right, the increase would be of 2.7%. Considering the April Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), on which the COLA is based, rose to 3.4% the figure seems optimistic.

Mary Johnson, the long-tenured Social Security and Medicare policy analyst at the Senior Citizens League now retired, disagrees with the prediction. She puts the 2025 COLA at 3.2%, which would be a repeat of this year’s figure.

But why this difference in COLA? Why do the Social Security Trustees seem to predict the lower numbers? Well, the aim is to control inflation before the end of the year and adjust it down as close as possible towards 2%, and although very slowly, there are indicators that mark a return to this number. Also, history. Apart from these weird post pandemic years, the last 25 years have seen COLAs bellow or at 2.7%, and three of those 25 years did not even have an increase at all.

So what is the real verdict? Will the COLA be higher or lower? And will the trend we have seen the past two years continue in time? It is impossible to know. Given the volatility of the past few years it does stand to reason to declare them outliers and attempt to go back to “normal” indexes and numbers, but it is impossible to predict it.

Even experts are not in agreement, and their predictions for the next five months vary so much that their COLAs fluctuate between a conservative 2.7% and a generous 3.2%. Given this, taking preventative measures yourself may be the best course of action. Monitor your spending and streamline your life, live below your means and do not bank on an increase that may or may not come, cover all your outstanding expenses or be the best for your specific situation.