New projections for the next 2025 COLA increase have emerged in recent days. The fall season is quickly approaching, and significant changes in the cost of living adjustment (COLA) rising prognosis are becoming obvious. If you are an American who currently receives or is about to apply for any of the programs managed by the Social Security Administration (SSA), remember that understanding how much the next COLA increase will be and how it will affect Social Security benefits, particularly seniors’ benefits, is critical for understanding your current or future retirement plan.

How does the COLA increase impact millions of Social Security beneficiaries?

The cost of living adjustment (COLA) is a percentage that affects monetary values used by the Social Security Administration (SSA) in operations relating to the programs it supervises. Depending on the program, the impact will be proportional yet distinct.

How is the COLA increase calculated?

The COLA increase is a figure determined annually using the averaged value for the third quarter of the year (July, August, and September) of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is a metric that fundamentally tracks a fixed basket of goods and services in the economy and then weights them based on the unique spending habits of households whose members earn at least 50% of their income from clerical or wage-earning work.

The average CPI-W variance is then analyzed over two years to determine our COLA rise. In 2024, its number was 3.2%, indicating a significant rise in a retiree’s Social Security payment, for example, from $1,828.30 in 2023 to $1,909.01 in 2024. Although there is currently no fixed defined value for the 2025 COLA, there is some uncertainty about how much inflation can change over the next three months, as it was initially estimated to be a 1.75% increase that later increased to a 2.6% increase, and now that inflation is near 3.5%, it may indicate a further rise.

When is the COLA increase going to take effect?

Next month marks the start of the critical time to determine the next cost of living adjustment (COLA) increase for 2025. Therefore, it is important to point out that information about how the cost of living is behaving will be critical to understanding and forecasting what will happen next year. After the definition of the next COLA increase, it will be implemented until January 2025, so the actual increases in your Social Security benefits will take effect as of that date.