Social Security Benefits’ Projected Raise Keeps Shrinking

The projected Social Security raise for next year notched lower to 2.6% on cooler-than-expected inflation data.

Last month’s estimate for the 2025 cost-of-living adjustment was 2.7%, according to Mary Johnson, an independent Social Security and Medicare policy analyst and author of the projections. The Social Security Administration will announce the actual COLA in October, once the third quarter inflation data is complete.

The July consumer price index rose 2.9% over the same period last year, lower than the 3% forecast. The COLA calculation is based on a subset of the headline inflation index called the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as the CPI-W, which also rose 2.9% over the past 12 months.

Next year’s Social Security raise will be equal to the percentage gain in the average level of CPI-W for the third quarter of 2024 from the average for the same period in 2023. If there is no increase, there will be no COLA.

A raise of 2.6% would add an extra $49 a month to the average retirement check of about $1,870. However, most Social Security recipients won’t pocket the full increase. That’s because Medicare Part B premiums are automatically deducted from Social Security checks, and the Medicare Trustees project the standard Part B premium for 2025 at $185, just over $10 more than this year’s $174.70.

The Centers for Medicare and Medicaid Services will announce the actual Part B premium for 2025 later this year.

While the COLA is designed to help Social Security checks keep pace with inflation, benefits have actually lost 20% of their purchasing power since 2010, according to research by The Senior Citizens League.

Write to Elizabeth O’Brien at elizabeth.obrien@barrons.com