by Calculated Risk on 6/23/2025 02:27:00 PM
The BLS reported earlier this month:
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 2.2 percent over the last 12 months to an index level of 314.839 (1982-84=100). For the month, the index increased 0.2 percent prior to seasonal adjustment.
CPI-W is the index that is used to calculate the Cost-Of-Living Adjustments (COLA). The calculation dates have changed over time (see Cost-of-Living Adjustments), but the current calculation uses the average CPI-W for the three months in Q3 (July, August, September) and compares to the average for the highest previous average of Q3 months. Note: this is not the headline CPI-U and is not seasonally adjusted (NSA).
• In 2024, the Q3 average of CPI-W was 308.729.
The 2024 Q3 average was the highest Q3 average, so we only have to compare Q3 this year to last year.
This graph shows CPI-W since January 2000. The red lines are the Q3 average of CPI-W for each year.
Note: The year labeled is for the calculation, and the adjustment is effective for December of that year (received by beneficiaries in January of the following year).
CPI-W was up 2.2% year-over-year in May, and although this is very early – we need the data for July, August and September – my very early guess is COLA will probably be in the 2% to 3% range again this year, possibly the smallest increase since 1.3% in 2021 (the increase was 2.5% for 2025).
Contribution and Benefit Base
The contribution base will be adjusted using the National Average Wage Index. This is based on a one-year lag. The National Average Wage Index is not available for 2024 yet, although we know wages increased solidly in 2024. If wages increased 5% in 2024, then the contribution base next year will increase to around $185,000 in 2026, from the current $176,100.
Remember – this is a very early look. What matters is average CPI-W, NSA, for all three months in Q3 (July, August and September).
