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2025 Social Security COLA estimate slips, keeping seniors under pressure
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Date:2025-04-16 14:42:44
The latest estimate of Social Security's cost-of-living adjustment (COLA) for 2025 slipped to 2.7% after the government said inflation cooled more than expected in June, new calculations showed Thursday.
In June, the 2025 COLA forecast was 3%.
The consumer price index (CPI), a broad measure of goods and services costs, rose 3% in June from a year earlier, the government said on Thursday. That's down from 3.3% in May and below the 3.1% FactSet consensus forecast from economists. The so-called core rate, which strips out volatile food and energy prices, rose 3.3%, the lowest level since April 2021 and down from 3.4% in May. That was also below predictions for 3.4%.
COLA is based on the "consumer price index for urban wage earners and clerical workers," or CPI-W. That figure fell to 2.9% from May's 3.2% and, is finally below the 3.2% COLA Social Security recipients began receiving in January.
The decline in the estimated 2025 COLA adjustment is likely to be bad news for seniors who continue to grapple with the cumulative effect of high inflation over the past few years and high prices for daily essentials, said Mary Johnson, a retired analyst for the nonprofit Senior Citizens League who tracks and calculates the COLA estimates.
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Inflation remains the top concern facing retired Americans (89%) in investment firm Schroders' 2024 US Retirement Survey, which was released in May.
"Whether it’s a trip to the gas station, grocery store or pharmacy, prices in the U.S. have increased noticeably in recent years, and that is particularly challenging for retirees living on fixed income sources," said Deb Boyden, head of U.S. Defined Contribution at Schroders.
Daily essentials prices are still rising fast
Items like food, shelter, electricity, hospital and outpatient medical services that seniors spend the most money on continue to outpace the overall rate of inflation, Johnson said.
While overall food prices rose by just 2.2% in June, many of the most frequently consumed proteins rose much more, she said. Beef roasts in June were up 10%, pork chops rose 7.4% and eggs jumped 10.2% from a year ago, government data showed.
At the same time, "our nation’s record-breaking heat means record breaking electrical bills for many Social Security recipients," she said. Annual electricity prices gained 4.4% in June, data showed.
Health problems that required hospital inpatient or outpatient services, as well as care at home have grown roughly three times faster than overall inflation. Year-over-year hospital services increased 7.1% in June and at-home elderly care soared 11.4%, the government said.
Retired and disabled Social Security recipients also spend about half of their household budget on shelter costs, which have grown by 5.4%, Johnson noted.
“Clearly, persistently high prices for key essentials are causing distress for many older and disabled Social Security recipients," Johnson said.
How is COLA calculated?
The Social Security Administration bases its COLA each year on average annual increases in the consumer price index for urban wage earners and clerical workers (CPI-W) from July through September.
The index for urban wage earners largely reflects the broad index the Labor Department releases each month, although it differs slightly. Last month, while the overall consumer price index rose 3%, the index for urban wage earners increased 2.9%.
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What was 2024's COLA?
Older adults received a 3.2% bump in their Social Security checks at the beginning of the year to help recipients keep pace with inflation. That increased the average retiree benefit by $59 per month.
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
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