July Is an Important Month for Social Security. Here's Why
If you're receiving Social Security benefits, July is a very important month for you. This month could play a big role in determining the amount of income you have to spend next year. Here's why this month matters so much for seniors who rely on their Social Security checks to help them make ends meet.
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July is going to play a big role in determining your 2025 raise
There's a very important reason July matters so much for Social Security. It has to do with your Cost of Living Adjustment.
Cost of Living Adjustments, or COLAs, are applied to Social Security benefits in most years. COLAs increase the amount of your benefit so you have more money coming in. The reason this happens is to help ensure your benefits don't lose value. Since inflation continually causes price increases over time, benefits must increase to keep pace with rising costs or they'd buy you less every year.
COLAs are calculated using a specific formula. Social Security looks at the data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This is a financial index that tracks the costs of a basket of goods and services. If CPI-W shows prices are going up, retirees are getting a raise.
The COLA is based on changes to CPI-W that occur during a specific time frame: the third quarter of the year. July is the first month in the third quarter, so the July CPI-W numbers are going to be the first that are included in the average of CPI-W used to measure year-over-year price increases.
Social Security will look at the data from July, August, and September of 2024 and compare it to the CPI-W data for the same months in 2023. The percentage change in the CPI numbers will equal the benefits increase you receive. So if the CPI data shows costs are up 3.00% year over year, you'd get a 3.00% raise.
When will you find out your 2025 Cost of Living Adjustment?
July is a key month because it's the first month when CPI-W numbers will be part of the COLA calculation. However, it is just the first of three months. The Social Security Administration is going to need data from August and September as well in order to calculate the raise you'll get in 2025.
This data doesn't become available right away, so the Social Security COLA for next year will be announced in October, after the September data is published. Still, you can look at the numbers so far this year, as well as July's crucial number that will be available in August, and you can get an idea of which way they are trending. This will help you to project what your COLA is going to be.
The Senior Citizens League has already projected that the raise is likely to be around 2.63% next year, but this is just an estimate based on number that are not from the crucial third-quarter data. It could easily change depending what July numbers show. Be sure to watch for this information so you can get an idea of how much extra money you'll likely bring home next year.
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