Several individuals are asking what is going to occur with Social Security in light of the present election cycle and the ongoing attention being paid to topics like unemployment and the national debt.
While it’s difficult to forecast long-term developments because so much may change based on events like election results and economic conditions, it’s usually easier if you look at short-term Social Security changes. This is because the cost-of-living adjustment (COLA) formula is used to determine Social Security benefit hikes.
How COLA Functions
Social Security receives a COLA every year, except for the few years when there is almost little inflation; even in these cases, benefits do not drop.
According to any increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), the COLA is calculated. But the computation particularly contrasts the CPI-W’s third-quarter average with the third quarter of the prior year (presuming a COLA was in place at that time as well).
Accordingly, depending on the CPI-W rise for the 3rd quarter of 2023 relative to the 3rd quarter of 2022, there was a COLA of 3.2% in December 2023, for instance. It should be noted that although the change took effect on December 1, Social Security beneficiaries are not aware of it when they begin receiving benefit payments in January.
The CPI-W is still being collected until September, and this year’s COLA will be based on how much it rises in the 3rd quarter of 2024 as opposed to the third quarter of 2023. On October 10, the Bureau of Labor Statistics will be required to provide this inflation data; shortly after, the Social Security Administration will likely announce its official 2025 COLA rise.
How Much Will 2025 See a Rise in Social Security Benefits?
The third quarter of 2024 is probably going to see some inflation, even though current inflation data has moderated. This will have an impact on Social Security benefits in 2025. The Senior Citizens League’s most recent estimate is that the COLA in 2025 is expected to be 2.63%.