Exact date COLA will be announced and Americans are in for less Social Security in the new year
The Social Security cost of living adjustment (COLA) for 2025 is anticipated to be 2.5%, according to the Senior Citizens League (TSCL) model. This estimate reflects a decrease in consumer price data from 2.9% to 2.5%.
Upcoming Official Announcement
While the Social Security Administration (SSA) is set to officially announce the COLA on October 10, many retirees are preparing for a smaller increase in benefits compared to previous years. A 2.5% adjustment would result in a monthly increase of approximately $48 for the average retired worker, whose current monthly benefit stands at around $1,920.
Historical Context
Although this increase is lower than the 3.2% granted in 2024, it aligns closely with the historical average. Over the past two decades, the COLA has averaged 2.6%, exhibiting significant fluctuations. For instance, retirees received an impressive 8.7% boost in 2023, the highest since 1981, while adjustments of 0% occurred in years like 2010, 2011, and 2016.
How COLA Is Determined
By law, the annual COLA is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The Bureau of Labor Statistics computes the average CPI-W for the months of July, August, and September and compares it to the same period from the previous year. The percentage difference between these two periods establishes the COLA, which will affect checks received starting in January 2025.
Rising Expenses for Seniors
As inflation continues to influence everyday costs, older Americans are facing mounting financial pressures. According to TSCL’s 2024 Retirement Survey, 65% of seniors now report monthly expenses exceeding $2,000, a significant increase from 55% in 2023. More retirees are spending between $4,000 to $6,000 per month, while fewer are able to manage on $1,000 or less.
Essential Expenses on the Rise
The escalating cost of living has mainly impacted essential expenses. Nearly 80% of seniors reported higher spending on necessities such as food, housing, and prescription drugs over the past year. Additionally, 63% expressed concerns that their current income may soon be insufficient to cover these basic costs.
Advocacy for Increased COLA
Shannon Benton, Executive Director of TSCL, emphasized the necessity of ensuring that seniors have adequate financial resources. “Ensuring that seniors have enough to feed and house themselves with dignity is a major reason why we advocate for a minimum COLA of 3%,” Benton stated. TSCL’s research indicates that roughly two-thirds of seniors depend on Social Security for over half of their monthly income, while 28% rely on it entirely.
Shortfalls in Coverage
Despite last year’s 3.2% COLA increase being a welcome relief, it fell short of keeping pace with inflation in the broader economy. Seniors, who largely depend on Social Security benefits for their expenses, find it increasingly challenging to make ends meet as inflation continues to outstrip annual adjustments.
Anomaly of the 2023 Increase
The large 8.7% COLA increase in 2023 was an anomaly, driven by soaring inflation following the pandemic. However, the anticipated 2.5% adjustment for 2025 may leave many retirees feeling the financial strain, as it is unlikely to fully offset rising living costs.
Additional Insights on Spending and Scams
In related COLA news, TSCL’s findings also indicate that older Americans are allocating more of their income each month to meet basic expenses. Moreover, beneficiaries are cautioned about Social Security scams claiming that their Social Security Number (SSN) will be revoked.
Also read: BIG UPDATE: Exact amount of increase in retiree paychecks – Will be announced in October
