A new estimate suggests that the Social Security cost-of-living adjustment for 2025 could be 2.6%.

• In 2025, Social Security beneficiaries may anticipate a smaller cost-of-living increase due to recent government data indicating inflation decreasing.
• According to a new estimate, the prospective Social Security COLA for 2025 may be the lowest since 2021.

Despite a recent decline in government inflation data, many retirees continue to face financial strain due to rising costs.

The COLA for next year's Social Security may not offer much assistance.

According to Mary Johnson, an independent Social Security and Medicare policy analyst, the Social Security COLA in 2025 may be 2.6%.

The 3.2% increase in benefits Americans saw in 2024 is significantly lower than the 8.7% COLA Social Security beneficiaries received in 2023 and the 5.9% increase for 2022.

According to Johnson, the prospective Social Security COLA for 2025 would be the lowest since 2021, but still in line with the average cost-of-living adjustments for the past two decades.

The annual Social Security cost-of-living adjustment is calculated based on third-quarter data from a subset of the consumer price index, known as the CPI-W. However, the estimate for 2025 is still subject to change.

The official increase in size may fluctuate based on new CPI data.

The COLA for the following year is usually announced by the Social Security Administration in October.

Older Americans feeling 'lingering effects' of high costs

A recent AARP survey found that over 60% of adults aged 50 and above worry about not having enough money to sustain themselves during retirement.

Older Americans are consistently concerned about inflation, with 37% fearing they won't be able to afford basic necessities like food and housing. Additionally, 70% of them worry that prices will increase faster than their incomes.

According to the Center for Retirement Research at Boston College, retirees are more negatively impacted by high inflation than near-retirees because their income is less likely to increase as prices rise.

An exception to this rule is Social Security benefits, which are adjusted for inflation on an annual basis.

However, some experts argue the annual increases to benefits have fallen short.

Since 2010, the Senior Citizens League, a nonpartisan senior group, reports that the average Social Security benefit has lost 20% of its buying power.

To maintain the same purchasing power as in 2010, the average monthly benefit for retired workers needs to rise by approximately 20%, from $1,860 to $2,230.

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The Consumer Price Index for the Elderly (CPI-E) may better reflect the costs retirees face, as advocates such as the Senior Citizens League have suggested.

However, not all experts agree the cost-of-living adjustment measure should be changed.

Alicia Munnell, director of the Center for Retirement Research at Boston College, previously stated that the annual adjustments, which are now calculated using a backward-looking method, fully compensate for inflation over time when fully implemented.

The gap between the CPI-E and the current cost-of-living adjustment measure has narrowed in recent years, according to research from the Center for Retirement Research. As a result, the authors suggested that switching to the CPI-E may not be the most beneficial option.