Social Security recipients could see the smallest COLA increase since 2021. Here’s what to expect.

Each year, the Social Security Administration adjusts its benefits to account for inflation, imposing annual cost-of-living increases that are intended to offset rising prices. This year, the program’s 67 million beneficiaries could see the smallest increase since 2021.

The Senior Citizens League, an advocacy group for older Americans, said the cost-of-living adjustment is projected to be about 2.63% in 2025. Said on Thursday. The figure is based on recent inflation data, including consumer prices in June 3% increaseThat is the smallest increase since June 2023 and well below the 3.1% forecast by economists.

If enacted, the 2.63% increase would represent a monthly payment increase of about $50, based on the current average monthly benefit of $1,907.

Of course, official word on this year’s cost-of-living adjustment, or COLA, won’t come until October, when the Social Security Administration traditionally determines the following year’s benefit increase for beneficiaries. The first payments with the new COLA will appear in most recipients’ January benefit checks.

The Senior Citizens League said inflation in the U.S. is slowing, but many seniors are not feeling any relief. Poverty among seniors continues to rise. Growth in recent yearsNearly half of people over the age of 65 said they were having difficulty paying their household bills, according to the latest Census Household Pulse, which surveyed people from May 28 to June 24.

“Rising grocery prices are creating food insecurity for many retirees,” the Senior Citizens League said in its statement. “Feeding America estimated that 5.5 million Americans age 60 and older suffered from food insecurity in 2021 in the most recent study available on the topic, and that number is likely even higher today.”

How does Social Security determine its COLA?

The Social Security Administration sets its annual COLA based on inflation during the third quarter, or July through September. The agency uses the average inflation rate during that period as a metric known as the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, which tracks spending by working Americans.

If the inflation rate is higher than the same period a year earlier, the COLA is adjusted upward by the difference.

But some advocacy groups and lawmakers have criticized the use of the CPI-W, because older Americans spend differently than younger workers. For example, the Senior Citizens League notes that the CPI-W assumes that workers spend about 7% of their income on health care, but older Americans can spend 16% or more on health costs.