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A Look Ahead at the Future of Social Security COLAs
With the Federal Reserve’s progress toward reigning in the inflationary spiral of the past few years, coupled with its 2% long-term target for inflation, the 2025 cost-of-living adjustment is likely to be well below the average of the past three years. Current projections are about a 2.5% or 2.6% increase beginning in January 2025, compared to an annual average of just under 6% for the 2022-2024 period. Looking down the road beyond 2025, forecasts are beginning to emerge that annual adjustments will remain low, as explained in the post on West Alabama Watchman by Jan McDonald, which you can read in full here.
(Editorial Note: Don’t be alarmed at the post’s title: “Bad News for US Retirees: FED Warns About Declining Social Security Payments in 2026.” The decline in COLA calculations will not translate to a decrease in payments; the decline is expected to be in the actual adjustment itself. No matter what happens with inflation and CPI measurements, benefit payments will continue as scheduled until 2033. At that point, absent Congressional action to reform Social Security could reduce benefits across the board.)