July CPI Report Offers Early 2025 COLA Estimates

The primary of three numbers the Social Safety Administration (SSA) will use to find out the 2025 cost-of-living adjustment (COLA) is in, and it factors to a extra modest enhance in month-to-month profit funds subsequent yr.

The Shopper Worth Index for City Wage Earners and Clerical Employees (CPI-W) rose by 2.9 p.c in July in comparison with a yr in the past. The COLA is predicated on how a lot that federal inflation gauge adjustments in July, August and September from one yr to the following. The ultimate determine for 2025 can be introduced in October.

Based mostly on 2023 inflation figures, the COLA for 2024 elevated month-to-month advantages by 3.2 p.c. Alicia Munnell, director of the Middle for Retirement Analysis at Boston School, says continued cooling of inflation might produce a 2025 adjustment of two.6 p.c to 2.9 p.c.

“Individuals are nonetheless not joyful as a result of costs are excessive,” she says, however “I believe we’re working our method out of this inflation scenario and the hurt that it did.”

Sri Reddy, senior vp for retirement and revenue options at Principal Monetary Group, can also be optimistic. “Inflation and core inflation have each appeared to come back down and normalize within the first half of the yr by means of June at about 3 p.c,” Reddy says. “Whereas July CPI outcomes have come down additional, barring any important macro occasions, the Social Safety COLA for subsequent yr must be between 2.75 and three.25 p.c.”

A COLA that matches the two.9 p.c July determine would enhance the typical Social Safety retirement profit — about $1,870 a month in June 2024 — by $54 a month beginning in January 2025. The typical month-to-month survivor profit ($1,508 in June) would go up by $44, and the typical Social Safety Incapacity Insurance coverage (SSDI cost ($1,538 in June) would tick up by $45.

The 2024 COLA boosted advantages by $59 a month for the typical retiree. The annual adjustment declined sharply final yr in tandem with cooling inflation. The 2023 COLA of 8.7 p.c, a byproduct of the sharp spike in client costs the yr earlier than, was the biggest proportion enhance since 1981.

“Social Safety is mostly the one inflation-protected supply of revenue for seniors in retirement,” says David Certner, legislative counsel and legislative coverage director for AARP. “Whether or not the price of residing rises considerably or by modest quantities, AARP has fought for years to guard the COLA, which helps seniors sustain with rising costs all through their retirement years.”