2025 Social Security Payment Increases Likely Smaller, Analyst Says

The COLA for next year’s checks will likely be smaller due to inflation.
2025 Social Security Payment Increases Likely Smaller, Analyst Says
Blank Social Security checks are run through a printer at the U.S. Treasury printing facility in Philadelphia, Pa., on Feb. 11, 2005. (William Thomas Cain/Getty Images)
Jack Phillips

A policy group predicted that the cost-of-living adjustment (COLA) for next year’s Social Security payments may be far lower than the past several years—due to inflation.

When inflation goes up, the Social Security Administration uses it to determine the COLA for the forthcoming year. Some economists have predicted the main inflation metric, the consumer price index for urban wage earners, may go down this year due to the recent interest rate hikes issued by the Federal Reserve.

According to the policy group, the Senior Citizens League, based on the 2.9 percent January consumer price index for urban wage earners, the group is “adjusting the long-term forecast COLA to 1.75 percent in 2025.” The overall consumer price index rose 3.1 percent last month, according to federal data.

“This is the forecast based on data through January 2024 that was released today, and the final COLA for 2025 is likely to be different from the estimates because the COLA is calculated on the average rate of inflation during the 3rd quarter which is compared against the 3rd quarter a year ago,” it said in a Feb. 13 news release. “In other words, there are another eight months of data to come in, and a lot could change.”

Even though the rate for 2025’s payments haven’t been confirmed, Mary Johnson the Senior Citizen League’s analyst, suggested that “clearly inflation rates are expected to fall from 2023 levels and the COLA for 2025 to be lower as well.”

“My estimates change month to month based on the most recent CPI data,” she told USA Today. “We still have eight months of data to come in and a lot could change.”
Meanwhile, a spokesperson for the group said that “no matter what the COLA is for 2025, The Senior Citizens League is urging Congress to work in a bipartisan way to keep Social Security strong and to provide American workers and retirees with a long-term solution that both current and future retirees can count on,” reported Newsweek.

If the adjustment to Social Security checks drops next year, Ms. Johnson added that it’s “not necessarily good news if prices for housing, hospital care, auto insurance, and other costs remain at today’s elevated levels.”

At the same time, more Social Security recipients will be taxed starting this year on their benefits.

“The growing number of those getting hit by the tax is due to fixed-income thresholds,” Ms. Johnson said, reported USA Today. “Unlike federal income tax brackets, the income thresholds that subject Social Security benefits to taxation have never been adjusted for inflation since the tax became effective in 1984.”

For this year, more than 71 million Social Security recipients got a 3.2 percent increase, marking the third straight year that an increase has taken place because of relatively high inflation. The previous year saw an 8.7 percent increase, while the year before that saw a 5.7 percent bump.

Federal Reserve Bank of San Francisco President Mary Daly told Reuters on Friday, “there is more work to do” to ensure stable prices after a number of analysts said the 3.1 percent inflation was hotter than anticipated. “We will need to resist the temptation to act quickly when patience is needed and be prepared to respond agilely as the economy evolves,” she added.

Inflation declined rapidly last year, from 5.5 percent in January to 2.6 percent in December by the Fed’s targeted measure of the personal consumption expenditures price index. Unemployment, meanwhile, was 3.7 percent last month, up just three tenths of a percentage point from the start of the year.

And while projections embedded in financial market pricing and reflected in surveys suggest inflation is on track to the Fed’s 2 percent target, she said, “we need more time and data to be sure that they will be realized.”

Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25 percent to 5.50 percent range.

Reuters contributed to this report.
Jack Phillips is a breaking news reporter with 15 years experience who started as a local New York City reporter. Having joined The Epoch Times' news team in 2009, Jack was born and raised near Modesto in California's Central Valley. Follow him on X: https://twitter.com/jackphillips5
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