2025 COLA Announcement: Why Many Retirees Are Disappointed with the Increase
Approximately 70.6 million Social Security recipients are poised to experience a smaller cost-of-living adjustment (COLA) in 2025 compared to previous years, attributed to a recent moderation in inflation. Analysts anticipate that the Social Security Administration will officially announce a 2.5% increase in benefits for 2025, a decline from the 3.2% COLA in 2024 and a notably higher 8.7% increase in 2023, which was fueled by the highest inflation levels in four decades.
Concerns Among Seniors
Sherri Myers, an 82-year-old resident of Pensacola, Florida, expresses skepticism about the upcoming COLA. While she acknowledges the increase in her benefits, she doubts it will significantly alleviate her financial strain. “It won’t make a dent,” Myers stated, highlighting the impact of inflation on her savings, which has left her without a financial buffer. To supplement her income, which consists of a modest pension and Social Security payments, Myers is actively seeking employment.
The average retiree, currently receiving about $1,920 per month, can expect a $48 increase in their monthly benefits due to the predicted 2.5% COLA, according to estimates from AARP. However, Bill Sweeney, Senior Vice President of Government Affairs at AARP, warns that many seniors may find this increase inadequate to keep pace with rising living costs. “I think a lot of seniors are going to say that this is not really enough to keep up with prices,” Sweeney noted, although he acknowledged that the smaller COLA indicates a moderation in inflation, a potentially positive economic signal.
Long-Term Challenges for Social Security
This announcement comes amid significant long-term financial challenges facing Social Security. The Social Security and Medicare trustees’ report released in May indicates that the Social Security Trust Fund could begin to pay reduced benefits starting in 2035, with the government potentially only able to provide 83% of scheduled benefits if the fund becomes depleted. Social Security is primarily funded through payroll taxes collected from both employees and employers. For 2024, the maximum amount of earnings subject to Social Security payroll taxes is set at $168,600, up from $160,200 in 2023, with expectations for this limit to increase to $174,900 in 2025.
Political Perspectives on Social Security
As the 2024 presidential campaign heats up, Social Security has emerged as a key issue, with candidates proposing different solutions to address the program’s funding shortfall. Vice President Kamala Harris has vowed to protect Social Security by advocating for wealthier Americans to contribute more in taxes. On her campaign website, she emphasizes the need to “make millionaires and billionaires pay their fair share in taxes” to ensure the program’s stability.
Conversely, former President Donald Trump has pledged not to cut Social Security or raise the retirement age. He has also proposed tax cuts for older Americans, stating on Truth Social, “SENIORS SHOULD NOT PAY TAX ON SOCIAL SECURITY!” Trump asserts that focusing on economic growth is the key to resolving Social Security’s financial challenges. In a late August interview with AARP, he reiterated his commitment not to alter Social Security, emphasizing, “I don’t want to do anything having to do with increasing age. I won’t do that.”
Harris, during her own interview with AARP, argued for addressing the funding gap through taxation of billionaires and large corporations, saying, “We will make up for the shortfall by making billionaires and big corporations pay their fair share in taxes and use that money to protect and strengthen Social Security for the long haul.”
Legislative Proposals and Advocacy
Several legislative proposals have emerged to tackle Social Security’s financial difficulties. The Republican Study Committee’s Fiscal Year 2025 plan, for instance, suggests cost reductions by raising the retirement age and cutting the annual COLA. However, Trump has not endorsed this plan.
Social Security Works, an advocacy group supporting the program, has voiced concerns regarding the Republican Study Committee’s proposals. Linda Benesch, a spokesperson for the group, stated, “We are concerned about this Republican Study Committee budget and the provisions in it that would cut benefits for retirees.”
Social Security Works has endorsed Harris for president, citing her commitment to safeguarding the program. As a senator from California, Harris co-sponsored a bill advocating for the use of the CPI-E, a consumer price index tailored to the elderly, for calculating COLA. This index considers the specific spending patterns of older Americans, such as healthcare and prescription drug costs, which tend to rise faster than other expenses. Currently, COLA is calculated using the Bureau of Labor Statistics’ Consumer Price Index (CPI), which reflects broader price changes across the economy.
