BIG UPDATE: Bad News coming for Retirees – New increase in Social Security checks is not what was expected
As the latest projections for the cost-of-living adjustment (COLA) emerge, it appears that Social Security checks will not see the expected increase many beneficiaries had hoped for. This news is particularly concerning for those who rely heavily on these benefits to cover essential living expenses, especially retirees who depend solely on Social Security for their income. According to a Gallup survey, which has tracked seniors’ reliance on Social Security for 23 years, the percentage of retirees depending on these benefits has consistently remained above 80%. In 2024, 88% of retirees reported their Social Security payments as a “major” or “minor” source of income.
The highly anticipated COLA announcement, set for October 10 at 8:30 a.m. Eastern time, is a key event for millions of Americans. Social Security serves as a vital financial foundation for the aging workforce, making this announcement critical.
The COLA Adjustment: What to Expect
The Social Security Administration (SSA) implements the COLA to adjust benefits according to fluctuations in prices for goods and services. When prices rise by 2%, 3%, or even 5%, Social Security benefits are adjusted accordingly to help beneficiaries maintain their purchasing power. This annual adjustment is crucial for keeping up with inflation and ensuring that retirees can afford their everyday needs.
Historically, before the introduction of COLA in 1975, adjustments to benefits were made arbitrarily by Congress. The absence of COLAs in the 1940s resulted in 11 significant changes between 1950 and 1974. Since then, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) has been used to determine the annual COLA, effectively linking Social Security benefits to inflation.
How COLA is Calculated
The CPI-W is a complex tool that includes over six major spending categories, each with its own percentage weighting. The calculations for COLA focus only on the average CPI-W readings from the third quarter of each year (July to September), comparing them to the same period from the previous year. If the current year’s average CPI-W is higher, benefits will increase based on the year-over-year percentage change, rounded to the nearest tenth of a percent.
Diminished Expectations for 2025
The average COLA over the past 20 years has been a modest 2.6%, which includes instances of no adjustment during years of deflation. However, recent years have seen some recovery with a 5.9% COLA in 2022, an 8.7% increase in 2023, and a 3.2% increase in 2024—the largest increase in over four decades. Unfortunately, recent inflation data from July and August has significantly lowered expectations for the 2025 COLA.
Mary Johnson, a retired Social Security and Medicare policy analyst, has revised her COLA projection for 2025 from 3.2% to 2.6% based on the latest inflation reports. Both The Senior Citizens League (TSCL) and Johnson’s estimates align on this figure, which is expected to result in an additional $46.35 per check for nearly 68 million beneficiaries, assuming an average benefit of $1,782.74 as of July 2024.
A Historic Milestone
While a 2.6% increase is the smallest percentage boost in four years, it still aligns with the average COLA over the last two decades. Remarkably, if this adjustment is realized, it would mark the first time since 1997 that Social Security COLAs have been increased for four consecutive years. By the end of 2022, cumulative benefits would have risen by over 22%, assuming the projected 2.6% COLA is enacted.
Despite these increases looking favorable on paper, there are pressing concerns regarding the adequacy of Social Security’s COLA in light of rising living costs and inflation. Many beneficiaries may find that the adjustment, while technically a boost, does not significantly alleviate their financial challenges. As we await the official announcement, it’s important for retirees to stay informed about how these changes will impact their financial situations.
