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COLA Watch 2025…But It’s Still Almost Six Months Away
Projections on what the January 2025 cost-of-living benefit adjustment will look like are beginning to hit the media airwaves. Here’s one preliminary assessment from The Senior Citizens League (TSCL), courtesy of CPA Practice Advisor, forecasting the possibility of a 2.6% adjustment after the smoke clears on the October calculation. This, of course, would be about a 20% reduction from the 2024 COLA, but it’s a substantial improvement over TSCL’s February forecast of 1.75%. The wild swing in numbers illustrates how futile it is to think about what next year’s adjustment is likely to be, given the length of time between now and the third quarter, and given the many variables that affect the final calculation.
Given the variety of unknowns in today’s economy (it is an election year, after all), it’s good to look at early projections as simple guesses. The size of the adjustment fluctuates with economic cycles, and has ranged from a high of 14.3 percent in 1980 to 0.3% in 2017 (excluding, of course, the zero years). Here’s a historical look-see at how the adjustments occurred since 1974, just to show you the cycles in action. The historical average for these 49 years, incidentally, was 3.8 percent, so the 2024 adjustment of 3.2% wasn’t that far from the average.
We’ll keep you posted as new projections are announced, but it’s important to remember that the actual calculation compares third quarter CPI-W data to the same period of the preceding year. There’s a lot that can happen with CPI between now and the July-September period.