Retirees Face Lowest COLA Increase Since 2021 Amid Cooling Inflation

Retirees who depend on Social Security benefits are set to experience the lowest cost-of-living adjustment (COLA) increase since 2021. The latest prediction for the 2025 COLA is a modest rise of 2.5%, slightly down from 2.6% as inflation begins to cool. This forecast was made by Kiplinger’s chief economist and is based on the latest inflation data released by the federal Bureau of Labor Statistics.

The average monthly retiree benefit currently stands at approximately $1,870. With a COLA of 2.5%, retirees can expect an increase of about $47 per month or $564 annually. However, this modest increase might pose challenges for seniors in keeping up with rising expenses in energy, clothing, transportation, and shelter, which are key contributors to the present inflation rate, according to Kiplinger’s investing expert. The adjusted COLA for 2025 will be reflected in Social Security payments starting January.

The calculation of the COLA does not include Medicare costs, which are not factored into the Consumer Price Index used for determining the adjustment. Currently, the CPI-W, considering price inflation for adults below 62 years, is utilized. Some lawmakers propose adopting the Consumer Price Index for the Elderly (CPI-E) to better align with actual retiree expenditures on healthcare and associated costs.

Changes in the COLA are based on the CPI-W, a measure of price changes for a selection of goods and services, including food, energy, and medical care. This index is reported monthly by the Bureau of Labor Statistics and is a subset of the broader Consumer Price Index. With these changes, Social Security beneficiaries are encouraged to secure their accounts through the Login.gov platform to prevent any potential fraud.

The Social Security Administration has alerted individuals with accounts made before September 18, 2021, to switch over to the Login.gov system. Users can seamlessly transfer their account during login to my Social Security. By claiming a personal account now, beneficiaries can prevent fraudsters from exploiting their Social Security number and misdirecting their Social Security benefits.