Social Security set to change before end of year – while 2025 increase predicted to drop to 2.5%
As we approach the announcement of the next cost-of-living adjustment (COLA) for Social Security recipients, projections indicate it may be the lowest increase in years. Based on consumer price index data available through August, beneficiaries could see a modest 2.5% increase in their payments for the upcoming year.
A Declining Projection
This projected 2.5% adjustment is a decrease from earlier estimates of 2.63% in July and 2.57% in August, as reported by The Senior Citizens League (TSCL), a nonpartisan advocacy group for seniors. This marks the smallest increase since 2021, when beneficiaries received a 1.3% bump in their payments.
For an average retired worker receiving a monthly benefit of $1,920, the 2.5% increase translates to an additional $48 per month, according to a recent press release from TSCL.
Insufficient Support for Fixed Incomes
Shannon Benton, TSCL’s executive director, expressed concerns about the projected increase, stating that an average boost of $48 does little to alleviate the financial strain on recipients who rely on Social Security as their primary source of income. After deducting Medicare Part B premiums and other expenses, many seniors may find this adjustment nearly insignificant.
“A 2.5% increase does little to offset rising costs of living, including inflation and price hikes for essential goods and services,” Benton remarked.
Understanding COLA Adjustments
The Social Security Administration employs annual COLA adjustments to help recipients maintain their purchasing power amid inflation. These adjustments are calculated using the Bureau of Labor Statistics’ CPI-W, which measures price changes for a broad basket of goods and services frequently purchased by urban wage earners and clerical workers.
Following a period of record inflation, the COLA reached 8.7% in 2023, the highest in decades, before decreasing to 3.2% in 2024. The current projection of a 2.5% increase reflects a continued downward trend as inflation rates appear to be cooling.
Historical Context and Current Concerns
While a 2.5% adjustment is closer to historical averages—the COLA has averaged around 2.6% over the past 20 years—TSCL argues that it may still fall short in covering rising living costs for seniors. The advocacy group highlights that essential expenses like medication, housing, and groceries may not be fully reflected in the CPI-W calculations.
“This year’s COLA is particularly crucial, as many seniors reported that last year’s increase did not keep pace with their actual expenses,” TSCL noted in a June report.
In its 2024 Senior Survey, 69% of around 1,550 respondents indicated that their household costs rose faster than their COLA over the previous year, with food and housing being the primary drivers of those increases.
Rising Financial Pressure on Seniors
The TSCL’s findings reveal that older Americans are spending an increasing portion of their income on basic necessities. According to its 2024 Retirement Survey, 65% of seniors reported monthly expenses of at least $2,000, up from 55% in 2023. This trend spans various income levels, with more seniors now reporting expenses of $4,000 or even $6,000 compared to the previous year.
Amid these financial pressures, nearly 80% of senior households surveyed in 2024 reported an uptick in their budget for essential items like food, housing, and prescription drugs over the past year. Additionally, 63% expressed concerns that their income might not be sufficient to cover these basic costs in the coming months.
“Ensuring that seniors can afford to feed and house themselves with dignity is a major reason why we advocate for a minimum COLA of 3%,” said Shannon Benton.
Looking Ahead to October
The official COLA for the upcoming year will be announced by the Social Security Administration (SSA) in mid-October, following the release of September’s CPI data. The annual adjustment is based on average inflation during July, August, and September, as measured by the CPI-W.
As Social Security recipients await the final determination, many face the reality of rising costs and the potential for an insufficient adjustment to meet their financial needs. While the projected 2.5% increase aligns more closely with historical norms, it still leaves many seniors anxious about maintaining their standard of living amid ongoing economic challenges.
Also Read: BIG UPDATE: Total Change in SNAP Benefits Beginning in October – List of People Who Will Be Affected
