The Consumer Price Index for Wages (CPI-W) reports that wage inflation is still increasing, but slower than before and this means that the Social Security COLA 2025 may only be 2.55%.
What is Social Security’s COLA 2025?
COLA is short for cost-of-living adjustment and is an increase in a retiree’s Social Security benefit on an annual basis to help them keep up with the rate of inflation if there is any.
How is the Social Security COLA 2025 calculated?
Federal regulations state that the Social Security COLA is determined by :
“Basing the increase in the third-quarter average CPI-W over the average CPI-W for the last base quarter. The last base quarter is the third quarter of any year which are the months of July, August, and September.
To calculate the upcoming COLA simply take the average of the Consumer Price Index for Urban Workers (CPI-W) from the previous year’s 3rd quarter and find the percentage difference to the current year’s 3rd quarter.
The Social Security Administration (SSA) is reporting that the 2023 CPI-W average is 301.236 while the 3rd quarter in 2024 is not over but if the CPI-W remains constant the base average will be 308.904.
This places the COLA to be 2.55% for the upcoming year which is very close to the current projection of 2.60% set by the Board of Trustees of Social Security.
Other Considerations for Social Security COLA 2025
According to federal regulations, a retiree’s Social Security benefit automatically pays the bulk of their Medicare premiums (Part B is automatic and Parts C and D are optional).
The reality is that Medicare premiums are increasing annually at a much faster rate than a retiree’s Social Security benefit.
According to the Medicare Board of Trustees:
- Medicare Part B premium will increase by 5.90% from 2024 to 2025.
- Medicare Part D premiums, due to the Inflation Reduction Act, may also inflate by as much as 6.00%.
Conclusion to Social Security COLA 2025
In a nut shell:
- Social Security’s COLA =2.55%.
- Medicare premiums = 5.95%.
Retirees should not expect their Social Security benefit to keep up with inflation.
