We Have 5 of the 6 Pieces of Data We Need to Calculate the 2025 Social Security Cost-of-Living Adjustment (COLA). Here's What They're Telling Us.

The Social Security Administration will officially announce the 2025 cost-of-living adjustment (COLA) on Oct. 10, 2024. It might seem like an arbitrary date to you, but it's not. That's when the government releases the September figure for the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

It's the final piece of information we need to determine the Social Security COLA. But we have the five other numbers that go into that calculation, and they're already giving us hints about where the 2025 COLA will end up.

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How the Social Security Administration will calculate the 2025 COLA

The government calculates the COLA by looking at the change in average third-quarter inflation data as indicated by the CPI-W. It sounds more complicated than it is. Basically, it's going to take the numbers from July, August, and September from this year, total them up, divide by three, and then compare this average to the average from last year. The difference will be the 2025 COLA.

We obviously have all the 2023 figures already and we know the numbers from July and August of this year. They're listed below:

Data source: Social Security Administration.

This can seem confusing, but all you really need to know is that the CPI-W attempts to measure the price of a basket of common goods and services over time. Higher numbers mean you need to spend more than in the past to buy the items.

It's normal for CPI-W figures to rise because inflation makes everything more expensive over time. But the speed at which these rates rise varies. We saw sharp increases due to high inflation over the last few years, which led to above-average COLAs. But now inflation is cooling, and that's going to lead to a smaller COLA.

What the 2025 Social Security COLA will look like

We can't say with certainty what the 2025 COLA will look like until we get that final piece of data on Oct. 10, 2024. But the latest projection from The Senior Citizens League puts the COLA around 2.5%. That would add about $48 to the $1,920 average monthly check as of August 2024.

It's probably lower than what most people were hoping to hear. But keep in mind that some people may see larger bumps to their benefit if their checks today are larger than average.

Once we know what the official COLA is, you can add it to your current benefit to get an approximation of your 2025 checks. The Social Security Administration will also send out personalized COLA notices to all beneficiaries starting in early December.

The government will apply the 2025 COLA to your benefit beginning in December. But since you receive checks in the month after the month they're due, you won't notice any difference until you get your January 2025 check.

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