COLA Increase 2025 Calculator: How Annual Cost of Living Adjustments (COLA) are Calculated?

COLA Increase 2025 Calculator: The main purpose of the Cost of Living Adjustment (COLA) is to protect Social Security and Supplemental Security Income (SSI) benefits from losing value due to inflation.

This adjustment is determined by the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) between the third quarter of the current year and the third quarter of the last year when a COLA was calculated.

• If there isn’t an increase, there is no COLA

The official measure required by law for the Social Security Administration to calculate COLAs is the CPI-W, which is calculated by the Department of Labor’s Bureau of Labor Statistics.

The anticipated Social Security cost of living adjustment may be marginally higher than the estimate from a month ago, according to the most recent consumer price data released.

The index used to calculate the COLA, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), only increased by 2.3 percent from year to year.

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The COLA estimate has been impacted, nevertheless, by a slight increase in the average inflation rate over the previous 12 months.

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Remember that this estimate could change because more data needs to be collected for a few more months before the October COLA announcement.

To find the COLA, the CPI-W’s estimate of the inflation rate for the third quarter (July, August, and September) is used.

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The total inflation rate for the last three months is averaged out and then compared to the average for the same time last year.

The amount of the COLA adjustment that will be applied to the checks that are distributed in January 2025 is determined by the percentage difference between the two averages.