Retirees who rely on social security payments ought to mark down an important date on their calendars this year – October 10.

That’s the day the social security administration (SSA) is expected to announce its annual cost of living adjustment (COLA) for 2025. All indications are from experts that retirees will see a 2.5% COLA for 2025, though this could change based on September’s inflation reading. Regardless, the 2025 COLA is expected to be lower than the 3.2% increase received in early 2024.

Of course, expert predictions as to where the ultimate cost of living increase will come in at are based on a number of factors that are in flux, and the number could be materially higher or lower than the 2.5% estimate, depending on how we see inflation data roll in over the coming days.

Here’s what investors may want to consider when it comes to these data, and what they may portend for next year’s budget.

Key Points About This Article:

• Retirees looking to budget out expenses for the upcoming fiscal year certainly have a number of key factors to consider.
• One of the most important factors that will help in budgeting out next year’s spending is the upcoming COLA, expecting on October 10.
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COLA Predictions

Given we’re now less than two weeks away from seeing what the upcoming cost of living adjustment will be for seniors, the tense build up to this announcement is certainly palpable for millions of Americans. 

That said, the ultimate conclusion most experts have come to is that a decline in inflation is expected to result in a modest 2.5% cost-of-living adjustment (COLA) for Social Security benefits in 2025. This will mark the smallest increase in three years, and is based on an estimate of August and July inflation data, with confirmation from September’s inflation figures yet to come in. The Social Security Administration will announce the official COLA following the release of September’s CPI on October 10. So, October 10 may not be the exact day we’ll know definitively, but market participants will certainly come to a conclusion by then 

While modest compared to the 2023 boost of 8.7%, a 2.5% increase remains crucial for seniors looking to meet the rising costs of healthcare, food, and housing. For instance, a retired worker earning about $1,920 monthly in 2024 would see an increase of roughly $48 in 2025, raising their benefit to about $1,968. Similarly, survivor benefits averaging $1,509 would rise by around $38 monthly, providing extra support to families.

Organizations like The Senior Citizens League continue to advocate for a minimum COLA of 3%, emphasizing that many seniors rely heavily on Social Security for their income.

Should Retirees Worry?

Consumers often dislike the term “inflation,” especially as it highlights how much less a dollar can buy compared to previous years. While inflation is generally preferred over deflation from an economic perspective, its impact can be significant. This is particularly true for those on fixed incomes, such as Social Security recipients. Fortunately, Social Security’s cost-of-living adjustments are designed to help mitigate some inflation effects.

Still, a projected 2.5% COLA would mark the smallest adjustment since 2021, so there are plenty of seniors out there calling for Congress to pass legislation to tie this increase to other macroeconomic factors. Personally, I think that may be feasible and reasonable, but given the size of the deficit and increasing calls for fiscal austerity, such measures may be in vain.

Higher inflation isn’t a good thing either. So, seniors are really stuck between a rock and a hard place right now. Of course, this whole discussion ultimately ends up at the same place – saving for retirement via one’s company-sponsored savings plan or in one’s own account is always advised, for those who don’t want to be reliant on the government. At a certain stage of life, however, this isn’t possible for millions of Americans.

Wrapping It Up

The announcement on October 10 will be crucial for millions of Americans relying on benefits. While the projected 2.5% increase appears modest compared to recent years, it will aid in offsetting rising living costs. Beneficiaries must stay informed about these changes to effectively plan their finances.

While the 2025 COLA prediction of 2.5% reflects a decrease from previous years, it aligns with long-term averages. The final official announcement will be made by the Social Security Administration in mid-October, after the completion of CPI-W data collection for September.

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