As we pass the midway point of 2024, all eyes are on the forthcoming Social Security Cost-of-Living Adjustment (COLA) for 2025. Early estimates indicate that retirees could be in for a smaller bump in their Social Security benefits. This forecast brings both apprehension and the necessity for strategic financial planning, especially for those depending on this lifeline. The outlook of a lower increase coupled with persistent economic uncertainty makes this topic immensely pertinent.
Anticipation is brewing over a projected 2025 COLA of around 2.57%. This figure—significantly lower than the 3.2% increase of 2024 and a staggering drop from the 8.7% hike of 2023—merits close attention. It’s not a guess plucked out of thin air. These early predictions come from the Senior Citizens League, a respected advocacy group recognized for its reliable forecasts.
Seeing such a decrease might be concerning, particularly when inflation remains a thorn in the side of economic stability. But why this difference?
COLA adjustments are systematically calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This metric tracks the average change over time in the prices paid by urban consumers for a range of goods and services. High inflation typically results in a higher COLA, aimed at preserving the purchasing power of Social Security benefits.
However, fiscal year 2024 has shown signs of moderating inflation. The linkage between CPI-W and COLA means any drop in inflation rates typically translates to smaller adjustments in benefits. In simpler terms, when inflation cools, so does the COLA.
With the year half over, experts agree that Social Security retirees are likely to see a smaller cost-of-living adjustment in 2025 than in recent years.
To really appreciate why the 2025 COLA is projected to be lower, understanding the calculation mechanics matters. The CPI-W data from the third quarter (July, August, and September) of the current year compared to the same period in the previous year forms the basis for this adjustment.
Despite the fluctuating economic landscape, the trends in 2024 suggest a slowdown in inflation. This reduction reflects in the COLA projections, steering expectations towards a more modest increase. The actual announcement for the official 2025 COLA will not arrive until October. Until then, it’s important to look at early-year data to get a sense of what might come.
The cost-of-living adjustment is calculated using a specific formula. The government looks at the CPI-W and takes an average of the CPI-W index for the third quarter of the year, comparing it to the third quarter of the prior year. The COLA is then based on this difference.
If Q3 CPI-W data shows that prices on a basket of goods and services have increased by 3.2%, retirees will get a 3.2% COLA. This process allows experts to make predictions for next year’s raise based on initial trends.
So, what does this mean for your investments? It’s paramount to recognize that a smaller COLA doesn’t just affect your Social Security benefits—it carries broader economic implications. But amidst this landscape, certain sectors and stocks could still offer robust opportunities.
Procter & Gamble (PG): A titan in consumer staples, providing products always in demand.
| Info | Value |
| Consensus Rating | Overweight/Buy |
| Average Price Target | $172.18/$170.83 |
| Current Price | $166.79/$166.31 |
| Potential Gain | 2.72% to 12.44% |
| Number of Ratings | 27/18 |
Summary of Analyst Outlook:
Analysts are generally optimistic about Procter & Gamble (PG), with the majority recommending a “Buy” or “Overweight” rating. The average price target suggests the stock is expected to rise by around 2.7% to 12.4% in the next 12 months. Analysts anticipate strong earnings and performance relative to the overall industry.
Johnson & Johnson (JNJ): A stalwart in the healthcare sector with diversified operations ensuring stability.
| Metric | Value |
| Consensus Rating | Moderate Buy |
| Average Price Target | $171.77 |
| Current Price | $146.44 |
| Potential Gain | 20.26% |
| Number of Ratings | 23 |
Summary of Analyst Outlook:
Analysts view Johnson & Johnson (JNJ) favorably, with a consensus rating of “Moderate Buy”. The average price target of $171.77 suggests a potential upside of over 20%. Analysts believe in the robust and diversified business model of the company.
Charles Schwab (SCHW): Renowned for client-first brokerage and advisory services.
| Source | Consensus Rating | Average Price Target | Current Price | Potential Gain | Number of Ratings |
| N/A | Outperform | $69.89 | $50.05 | 39.56% | 20 |
Summary of Analyst Outlook:
The consensus rating for Charles Schwab (SCHW) varies between “Outperform” and “Moderate Buy,” indicating a generally favorable expectation. Predicted gains range from 2.39% to 39.56%, reflecting differences in analysts’ projections.
T. Rowe Price (TROW): Offers a range of investment and retirement services that could see heightened demand.
| Consensus Rating | Average Price Target | Current Price | Potential Gain | Number of Ratings |
| Moderate Sell | $114.82 | $115.43 | -0.53% | 11 |
Summary of Analyst Outlook:
Analysts at TipRanks and other sources are generally bearish on T. Rowe Price Inc. (TROW), with a consensus rating of “Moderate Sell”.
NextEra Energy (NEE): Leading clean energy firm with strong growth prospects.
| Source | Consensus Rating | Average Price Target | Current Price | Potential Gain | Number of Ratings |
| TipRanks | Moderate Buy | $79.06 | $70.80 | 11.67% | 20 |
Summary of Analyst Outlook for NextEra Energy:
Analysts at TipRanks and other sources give NextEra Energy (NEE) a consensus rating of “Moderate Buy” with a potential gain of around 11.67%.
Duke Energy (DUK): Provides reliable utility services with steady dividend payouts.
| Parameter | Information |
| Consensus Rating | Moderate Buy |
| Average Price Target | $103.80 |
| Current Price | $100.56 (Tipranks) or $99.71 (Zacks) |
| Potential Gain | 4.10% or 3.75% |
| Number of Ratings | 20 |
Analyst Outlook Summary:
The consensus analyst rating for Duke Energy (DUK) is “Moderate Buy” with an average potential gain of around 4.10% to 3.75%.
Pfizer (PFE): A pharmaceutical behemoth known for innovative treatments and vaccines.
| Metric | Value |
| Consensus Rating | Overweight |
| Average Price Target | $33.50 |
| Current Price | $27.83 |
| Potential Gain | 19.73% Upside |
| Number of Ratings | 26 |
Summary of Analyst Outlook:
Analysts are bullish on Pfizer Inc. (PFE), with a consensus rating of “Overweight” and an average price target indicating a potential gain of 19.73%.
UnitedHealth Group (UNH): A diversified healthcare company offering extensive insurance and health services.
| Information | Zacks | Nasdaq | TipRanks | WSJ |
| Consensus Rating | Strong Buy | Strong Buy | Strong Buy | Strong Buy |
| Average Price Target | $580.00 | N/A | $565.74 | N/A |
| Current Price | $509.26 | $509.26 | $509.26 | $509.26 |
| Potential Gain | 11.09% | N/A | 11.09% | N/A |
| Number of Ratings | 23 | N/A | 20 | N/A |
Summary of Analyst Outlook:
Analysts across various platforms recommend UnitedHealth (UNH) as a “Strong Buy”, with an average price target suggesting an 11.09% potential gain.
Understanding and preparing for a smaller COLA is pivotal. For retirees and those nearing retirement, it’s more than a statistic—it’s a call to action. Shifting investment strategies to consider inflation-resistant stocks, financial services, utilities, and healthcare can provide a bulwark against the economic ripples of a lower COLA.
Stay proactive, stay informed, and adjust your sails to ride the winds of change. Your financial future and security depend on the insights and actions you take today.
