According to a forecast from a prominent non-partisan advocacy group, senior citizens in the United States can expect their annual cost-of-living adjustment (COLA) increase to decrease by nearly two percent.
According to the January Consumer Price Index (CPI) report released on Tuesday, the Senior Citizens League (SSL) has forecasted a 1.75 percent Cost of Living Adjustment (COLA) for 2025. While this change is not yet confirmed, it will impact individuals receiving benefits from the Social Security Administration, including pensions and other welfare benefits.
The rate at which Social Security benefits are increased in response to inflation is known as COLA. Each year, a new rate is released, which is determined by the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). In January of this year, the rate was recorded at 2.9 percent. For the year 2025, the updated COLA rate will be based on the average rate of inflation during the third quarter of 2024, specifically the months of July, August, and September.
The SSL prediction for the Cost-of-Living Adjustment (COLA) is lower compared to the forecast by the Congressional Budget Office (CBO), which has projected a 2.5 percent increase. The SSL stated in their press release on Tuesday, February 13, that although the CBO uses a different methodology than TSCL’s, it is evident that inflation rates are expected to decrease from 2023 onwards, resulting in a lower COLA for 2025. Newsweek has reached out to the SSL via email for further comments outside of regular working hours.
Mary Johnson, a Social Security and Medicare policy analyst at TSCL, mentioned that the official rate for 2025 has yet to be announced. However, she emphasized that future predictions could either be higher or lower compared to the estimate released in January.
In an interview with USA Today, she mentioned that her estimates are subject to change on a monthly basis, depending on the latest CPI data. She also acknowledged that there are still eight more months of data to be collected, emphasizing the potential for significant changes in the future.
According to a report by NBC News, the official COLA rate has been falling considerably short of current predictions in recent years. In 2023, the COLA rise reached an impressive 8.7 percent, which was attributed to high inflation rates and marked the largest hike in 40 years. However, this year, the COLA rate is set at a more modest 3.2 percent. As a result, the estimated average monthly retirement benefit is expected to increase by $59 per month for 2024. This increase will raise the average benefit from $1,848 to $1,907.
The 8.7 percent increase in 2023 was certainly a welcome change for recipients of Social Security, considering the rising costs of living. However, it is important to note that this increase may have inadvertently pushed some individuals into a higher tax bracket if they have additional income from a job or other sources.
If you solely rely on your Social Security benefits as your source of income, you are generally not obligated to file a tax return. This implies that you are not required to pay taxes on your benefits.
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