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2025 Social Security COLA is projected to be 3.3%, based on the latest CPI-W projections (May 15, 2024).
Watch this video for the latest on the 2025 Social Security COLA projections and how Cost Of Living Adjustments are determined.
How is the Social Security COLA determined?
Social Security COLA is determined by a measure of inflation called CPI-W which is less widely reported than CPI-U.
For 2025, Social Security will look at the average CPI-W from the 3rd quarter of 2024 and compare it to the 3rd quarter of 2023 numbers.
How to project the 2025 Social Security COLA
With the latest CPI release we now have 10 of the 15 monthly numbers that go into the 2024 Social Security COLA calculation.
2023Q3 CPI-W Average: 301.236
Feb-Apr 2024 CPI-W Avg: 306.199
FEB 2024 CPI-W: 304.284
MAR 2024 CPI-W: 306.502
APR 2024 CPI-W: 307.811
2009-2023 average annualized CPI has been roughly 1.1% higher in the last 5 months of the SS COLA year vs. the first 7 months.
2025 Social Security COLA projection formula = 1.028^(7/12)*(1.039)^(5/12)-1 = 3.3%
What is the 2024 Social Security COLA?
2024 Social Security COLA is 3.2%. For more information on Social Security Cost of Living Adjustments, including past COLA increases visit https://www.ssa.gov/cola/.
Why is 2024 COLA so much lower than the past 2 years?
While 2024 COLA is lower than the last two years, remember that COLA is directly tied to inflation. The only reason COLA was so high in 2022 & 2023 is because inflation was so high in 2021 & 2022. Prior to 2022 the 30-year COLA average was 2.4%, so hopefully this is a sign that inflation is returning to ‘normal.’
What can I do to combat the lower Social Security COLA in 2024?
One bright spot for those on a fixed income is that interest rates are much higher. If you’re not getting over 4% on your savings or CDs then you need to find better banks to work with!
Here’s how to get more interest on your bank money.
If inflation is slowing, and you’re preparing for the year ahead you may consider moving some money into 1-2 year CDs so that you can be sure of the interest you’re getting on your money in 2024. And right now those CDs are paying much higher than the projected COLA!
Another option could be Treasury Bills. Right now they are paying higher interest than most similar bank accounts. Here’s how to get more interest from Treasury Bills through your Treasury Direct account.
You could also consider increasing your Social Security, by deferring your Social Security.
If you are between your Full Retirement Age and 70 you could write Social Security to ask them to defer your payments. You could wait all the way to 70, but if you defer for just 1 year you would get an 8% higher payout! That beats any bank account you could find.
Related: When Is the Right Time to File for Social Security?