Inflation points to lower cost of living adjustment for social security in 2025

A customer scans coupons at a grocery store in Washington, DC, on May 23, 2024.

Tom Williams | Cq-roll Call, Inc. | Getty Images

The rate of inflation is falling, still pointing to lower Adjustment of the social security cost of living for pensioners and other beneficiaries in 2025.

Social Security's cost-of-living adjustment (COLA) may be as high as 2.7% next year, according to an estimate from Mary Johnson, an independent policy analyst for Social Security and Medicare, based on new government data released Thursday.

That measure of inflation, the Consumer Price Index — which tracks the average change in the prices consumers pay for a basket of goods and services — hit about the lowest 12-month level in more than three years, based on June data.

Social Security adjusts benefits each year based on a subset of the CPI — the Consumer Price Index for Urban Wage Earners and Clerical Workers. The June CPI-W rose 2.9% over the past 12 months, according to the Bureau of Labor Statistics.

The new COLA estimate of 2.7% is lower than Johnson's previous forecast of a 3% benefit increase based on May CPI data. In 2024, Social Security beneficiaries received a 3.2% cost of living adjustment.

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While price increases have slowed, retirees, the disabled and others who rely on Social Security benefits still face higher costs, Johnson said.

For example, beneficiaries spend on average about half of their budget on housing costs. This category remains higher, even though inflation has fallen.

The estimate for the Social Security cost of living adjustment for 2025 may of course still change.

The Social Security Administration officially determines the cost-of-living adjustment by comparing the CPI-W data from the third quarter of that year to the third quarter of the previous year. If there is a percentage increase from one year to the next, that determines the COLA. However, if there is no increase, there is no COLA.

Normally, the agency announces the cost of living adjustment for the following year in October.

This is a developing story. Check back for updates.

Inflation falls 0.1% in June from the previous month, arguing for lower rates

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