Understanding the Cost-of-Living Adjustment and Its Impact on Benefits
Social Security COLA 2025 looks to be set at 2.71%. It all depends on how the CPI-W acts through the month of September.
The Consumer Price Index for Wages (CPI-W) reports that wage inflation is still increasing, but slower than before—this means the Social Security COLA 2025 may only be around 2.55-2.71%.
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.
The Social Security Administration (SSA) is reporting that the 2023 CPI-W average is 301.236 while the 3rd quarter in 2024, if CPI-W remains constant, the base average will be 308.904.
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.
This places the COLA to be approximately 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.
According to federal regulations, a retiree's Social Security benefit automatically pays the bulk of their Medicare premiums. Part B is automatic, while Parts C and D are optional.
When COLA increases are modest (like 2.55%), Medicare premium increases can consume a significant portion of the benefit increase. This is especially important for those subject to IRMAA surcharges.
Understanding how COLA interacts with Medicare premiums is essential for retirement planning.
Our tools help project how COLA affects your net Social Security benefits.
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