Cooling inflation has lowered the projected raise that Social Security recipients could receive next year to 2.7% from a projected 3% last month.

The June consumer price index rose 3% over the past 12 months, slightly less than the 3.1% forecast, with lower gas prices contributing to the slowdown. The June inflation print represented a 0.1% decline from last month, the first monthly decline since May 2020.

The annual Social Security cost-of-living adjustment (COLA) is based on a subset of the headline inflation index called the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as the CPI-W, which rose 2.9% over the past 12 months.

While overall inflation is easing, prices for essential items such as food, shelter, and electricity are rising higher than the composite rate. A 2.7% raise would fall short of matching the rise in those prices. “Clearly, persistently high prices for key essentials are causing distress for many older and disabled Social Security recipients,” Mary Johnson, an independent Social Security and Medicare policy analyst and author of the COLA projections, said.

The Social Security Administration will announce the actual COLA for 2025 in October, once inflation data from the third quarter are released. The raise will be equal to the percentage gain in the average level of CPI-W for the third quarter of 2024 from the average for the same period in 2023. If there is no increase, there will be no COLA.

Eligibility for Social Security retirement benefits begins at age 62. Starting at that age, you benefit from the annual COLA even if you aren’t yet collecting benefits. That’s because the COLA is applied to unclaimed benefits as well.