Early forecasts for the Social Security cost-of-living adjustment (COLA) in 2025 suggest a reduction from 3.2% this year and a large decrease from 8.7% the previous year. The latest Senior Citizens League cost of living adjustment (COLA) prediction for 2025 is based on a 1.75% rise for the upcoming Social Security payment. The increase is based on the most recent January Consumer Price Index for Urban Wage Warners and Clerical Workers, which came in at 2.9% and tracks the change in prices of goods and services over time.
This rise might impact all Social Security beneficiaries, including retirees, disabled workers, and survivors. If this forecast is accurate, the average monthly Social Security payment for retired workers will rise by $29 in 2025, from $1,680 to $1,709. COLA is determined by comparing monthly figures based on the most recent CPI data to figures from the third quarter of the year (July, August, and September) as compared to the same time the previous year. This means that the cost of living adjustment (COLA) will probably vary dramatically before the final decision is reached.
Senior Citizens League
With more than a million members, the Senior Citizens League (TSCL) is a strong, apolitical voice for seniors in the US. They support matters that are significant to seniors and retirees, such as tax relief, cost-of-living adjustments, Social Security and Medicare benefits, and other pressing issues. Through lobbying endeavors, public education campaigns, and media relations initiatives, they strive for legislative modifications that enhance seniors’ availability of healthcare, reasonably priced prescriptions, and a stable financial future.
TSCL estimate is lower than the Congressional Budget Office forecast
The Congressional Budget Office’s forecast, which places the COLA at 2.5%, is higher than the Senior Citizens League’s estimate. The group clarified that while the CBO employs a different approach than the Senior Citizens League, it is still anticipated that inflation rates will decline from 2023 levels and that the COLA for 2025 will likewise be lower.
Additionally, if the 1.75% estimate comes to pass, this increase would be the lowest rise since 2020, when the COLA was 1.3%. Before the significant hike to 8.7% in 2022—the largest COLA since 1981’s 11.2%—it shot up to 5.9% in 2021.
It is time to make the most of your cash
Even when inflation is declining, investors can still receive the highest interest rates in years on their cash investments. Johnson advised retirees with excess cash in their monthly budget to put those amounts down to help plan for future unforeseen costs. Another option to consider is online savings, as there are increased cash returns available.
Even when interest rates decline, certificates of deposit offer a means to ensure a specific return over a short- or long-term period. According to Lisa Featherngill, director of wealth planning at Comerica Wealth Management in Winston-Salem, North Carolina, and a certified financial planner, it also helps to restrict fixed spending and look for methods to reduce and save.
A yearly cash flow estimate can help identify any discrepancies between predicted revenue and expenses. Retirees may use investment income, if any, or find other ways to reduce expenses or increase the value of their cash reserves to make up the shortfall, according to her.
Consider other sources of fixed-income
According to Kelly LaVigne, vice president of consumer insights at Allianz Life, which specializes in annuities and life insurance, the average American receives around 40% of their income from employment through the Social Security payment.
As a result, it is beneficial to invest your savings so that they can grow in the future when you need to withdraw them, he explained. According to LaVigne, annuities—which offer a fixed income in retirement in return for a lump-sum investment—can be a useful tool for retirees looking to augment their income.