Social Security COLA Projection for 2025 Could be 2.57 Percent

The logo of the Social Security Administration seen outside a Social Security building in Burbank, Calif., on Nov. 5, 2020. Valerie Macon/AFP via Getty Images

Social Security cost-of-living adjustments (COLA) for 2025 could be less than earlier estimates, worsening the financial situation of recipients, according to The Senior Citizens League (TSCL).

“The 2025 COLA prediction is about 2.57 percent, down from 2.66 percent last month,” Alex Moore, Social Security and Medicare statistician at TSCL, said in a June 12 press release. This year’s COLA increase is crucial “because many seniors said it didn’t keep up with their real-life expenses last year,” the organization stated. The COLA increase of 2023 was 8.7 percent, which dipped to 3.2 percent in 2024. In TSCL’s 2024 Senior Survey, 69 percent said their household costs rose faster than COLA in 2023, with some of the main increases being housing and food expenses.

Half of the retirees in the survey took out money from their emergency savings last year. A third were forced to apply for SNAP benefits, visit a food pantry, or get hold of food stamps. Twenty-five percent depleted their savings or retirement accounts to zero.

“The fact is that COLAs have become less and less likely to keep up with inflation over time,” TSCL said. “Just one of the five COLAs implemented so far in the 2020s (20 percent) has outpaced inflation, compared to 40 percent in the 2010s and 60 percent in the 2000s and 1990s.”

When COLA adjustments are insufficient, it can leave seniors short of thousands of dollars in Social Security receipts.

A shortfall in COLA has a “long-lasting, cumulative effect,” TSCL states. For instance, if in the first year of receiving Social Security, the inflation is 5 percent, but COLA is 4 percent, then the individual stands to receive $1,040 rather than the $1,050 if COLA adjustment had adequately followed inflation.

In the second year, if both COLA and inflation are 5 percent, the check will only be $1,092 rather than $1,102.50. As the years pass, this gap becomes bigger if COLA is below inflation, the organization notes.

Meanwhile, the Social Security Administration (SSA) has taken action to ease some of the burdens faced by Social Security beneficiaries when they are overpaid. The law requires that the SSA seek repayment if they overpay a beneficiary.

Until March, if the agency overpaid, it would withhold 100 percent of their monthly benefits until the amount was recovered.

But beginning March 25, “the agency will collect 10 percent (or $10, whichever is greater) of the total monthly Social Security benefit to recover an overpayment, rather than collecting 100 percent as was previous procedure,” SSA said.

SSA Scam Alert

On June 13, the Office of the Inspector General of the SSA issued a “scam alert,” warning that fraudsters were circulating misinformation that Social Security benefits will rise by $600 in June.

“Any information regarding a current $600 increase is false and should be ignored,” the agency clarified. “SSA will announce a new COLA in October, if it applies. The COLA would begin with benefits payable in January 2025.”

The agency warned that criminals could use the situation to access personal information of beneficiaries in the guise of providing more COLA.

Since 1983, the SSA has issued its annual COLA adjustments in December. The SSA sends notices directly to beneficiaries in early December regarding the benefits they are expected to receive starting January of the following year.

Meanwhile, the SSA now projects its Old-Age and Survivors Insurance and Disability Insurance Trust Funds, which funds Social Security, to last one year more than expected until 2035.

At the time, there would only be enough income to pay 83 percent of scheduled benefits.

“This year’s report is a measure of good news for the millions of Americans who depend on Social Security, including the roughly 50 percent of seniors for whom Social Security is the difference between poverty and living in dignity—any potential benefit reduction event has been pushed off from 2034 to 2035,” said  Martin O’Malley, commissioner of the Social Security Administration.

He called on Congress to take action to extend the financial health of the trust fund.