Seniors, the time has come to steel yourselves for a modest increase in your Social Security check next year.

The annual COLA, or cost-of-living adjustment, is likely to be 2.6%, less than the 2024 COLA of 3.2%, which bumped up the average monthly benefit by more than $50, and well below the 8.7% increase in benefits received two years ago.

The reason: easing inflation, which is a good thing overall.

The crystal ball COLA estimate is based on inflation data from the Bureau of Labor Statistics released Wednesday morning that showed consumer prices in July rose 2.9% over the prior year, a tiny downtick from June’s 3% increase.

The COLA is calculated by averaging inflation data for the third quarter of the year — July, August, and September of 2024 — and then comparing that figure with the same data from last year. based on the Consumer Price Index (CPI) for all urban wage earners and clerical workers (CPI-W).

The Social Security Administration is expected to announce the actual 2025 COLA in mid-October after the release of the September CPI data.

We “expect a substantially lower COLA for next year after the 3.2% COLA in 2024,” Shannon Benton, executive director of the Senior Citizens League, told Yahoo Finance.

Seniors’ inflation still sticky

The wrench in it all is that while overall inflation is easing, the cost of things that gobble up a significant portion of many seniors' checks are not cooling at the same pace.

Prices for items such as shelter, electricity, hospital, and outpatient medical services — major expenses for millions of seniors — continue to outpace the overall rate of inflation.

A smaller COLA next year would pinch the more than 70 million retired senior citizens and disabled workers who are still grappling with high prices.

“Even though the rate of inflation has slowed considerably, we live in a brave new world of inflated prices for things retirees rely on such as housing, hospital and in-home healthcare that seem stuck on high for now,” Mary Johnson, Social Security and Medicare policy analyst, told Yahoo Finance.

“And we all are battling the high cost of keeping cool as temperatures set highs,” she added. “The price of electricity went up during the inflation years and hasn’t come down that much.”

Housing takes up to 50% of budgets. The shelter index increased 0.4 percent in July, up 5.1% year over year.

It’s pretty tough for seniors to get a grip on their budget when the two biggest expenses — housing and healthcare — keep ticking up.

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Benefits fall short for seniors

The problem is that Social Security’s annual increases haven’t always been enough, Benton said. For example, while there was 5.9% COLA bump in 2022, inflation clocked in at 7% in 2021 and 6.5% in 2022, according to the CPI.

Between 2010 and 2024, Social Security COLAs increased benefits 3.9% per year on average.

In the Senior Citizens League’s 2024 Retirement Survey, nearly half of those surveyed said they’re “getting by for now” but not confident about the future. And more than a quarter reported they are having trouble affording essentials.

For about half of seniors, Social Security provides at least half of their income, and for about 1 in 4 seniors, it accounts for at least 90% of income.

With an expected increase of just 2.6% next year, it won't be much easier to make ends meet.

"The projected cost-of-living adjustment for Social Security recipients is failing to keep up with the actual rise in living expenses,” Benton added. “This leaves many retirees unable to maintain a reasonable standard of living.”

Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist, and the author of 14 books, including "In Control at 50+: How to Succeed in The New World of Work" and "Never Too Old To Get Rich." Follow her on X @kerryhannon.

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