2025 Social Security COLA Forecast Looks Bleak For Retirees

Retirees are due for a cost-of-living adjustment, or COLA, but the benefit may decrease, according to preliminary forecasts by economists. Economic instability is also compounding their fears in this economy driven by seemingly greed-driven inflation. 

An estimated decrease to 2.6% from 3.2% (this year’s COLA) is forecasted for 2025, though the COLA will be finalized after the third quarter. Because of continued growing inflation and spending of emergency savings funds– 71% of retirees feel financially unstable. 

“The confidence both workers and retirees have in their ability to finance their retirements dropped significantly in 2023,” said Craig Copeland, EBRI director of Wealth Benefits. “The last time a decline in confidence of this magnitude occurred was in 2008 during the global financial crisis.” 

Also, 58% of retirees were curtailing nonessential spending due to economic uncertainty and rising costs of goods and supplies. 

Motley Fool explained how the COLA is calculated.

“Social Security’s cost-of-living adjustments (COLAs) are based on the average inflation rate during the third quarter, the three-month period that includes July, August, and September. Curiously, COLAs are calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a subset of the better-known CPI-U.”

It’s important to note that 2023’s COLA was a noteworthy 8.7%.

With retirees feeling the squeeze of rising prices, many are resorting to returning to the workforce–albeit part-time—to earn extra cash. Fifty-seven percent of Black households are fractured financially, and older Blacks are more likely to have to go back to physically demanding jobs than whites and other ethnic and racial populations.

Not only is the COLA causing concern, but an alarming study also revealed that Blacks may not even have access to retirement benefits like their white counterparts. 

A study by the Economic Policy Institute stated, “Only 57% of older workers (ages 55–64) and 53% of prime-age workers (ages 25–54) participate in an employer-based retirement plan, and this share plunges to 25% for workers ages 65 and older. Lack of access is the biggest factor depressing worker participation in retirement plans.”

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