According to new Bureau of Labor Statistics data, the Social Security beneficiaries’ cost-of-living adjustment (COLA) would be even smaller than expected. Senior Citizens League, a nonpartisan organization that promotes for older Americans, says Social Security recipients may only earn a 2.5% boost in payments next year based on CPI statistics through August.
This updated estimate is lower than July and August predictions of 2.63% and 2.57%. If this prediction holds, the COLA would be the lowest since 2021, when benefits rose 1.3%. Senior Citizens League: “A COLA of 2.5% would raise the average monthly benefit for retired workers of $1,920 by $48.”
The impact of the COLA on Social Security benefits
The goal of these yearly changes is to help people who get Social Security and Supplemental Security Income (SSI) keep their buying power in the face of inflation, which over time makes fixed income less valuable.
The Social Security Administration figures these changes out by looking at changes in the consumer price index from the Bureau of Labor Statistics. This index shows how much everyday goods and services cost.
After a time of high inflation, the COLA for 2023 hit 8.7%, which was a big increase meant to counteract the sharp rise in living costs. But because inflation is going down, the COLA for 2024 dropped to 3.2%, and the 2.5% estimate for 2025 shows that it will go down even more.
In spite of this drop, the Senior Citizens League has noticed that a 2.5% rise is not totally out of the ordinary when looking at past trends. In the last 15 years, COLAs have dropped to 0% more than once, so this year’s expected change is similar to what we’ve seen in the past.
However, the advocacy group says that the method used to figure out the COLA might not fully capture the financial struggles seniors face, especially when it comes to the high costs of food, housing, and medicine.
A group called the Senior Citizens League has pointed out that these basic costs of living often go up faster than the government’s more general measures of inflation. The group said in a study released earlier this year, “This year’s COLA will be important because many seniors said it didn’t keep up with their real-life costs last year.”
About 1,550 older adults responded to the Senior Citizens League’s poll in June. Sixty-nine percent of those people thought their household costs had gone up faster than the 2023 COLA. Rising costs for things like food and housing were named as big money problems for a lot of seniors.
The Senior Citizens League gives new COLA estimates every month as new information comes in. The final decision on next year’s cost-of-living adjustment won’t be made until the Bureau of Labor Statistics releases its new consumer price index figures for July, August, and September.
The official COLA will be revealed by the Social Security Administration in mid-October, after the finalization of September’s inflation numbers. This is based on the numbers from the last three months.
The yearly COLA is closely watched because for many older people, Social Security is still their main source of income. It is often seen as a sign of how well the program is adapting to the real-world economic conditions of its recipients. Beneficiaries are likely to be very interested in when the actual COLA for next year is announced.
This is especially true given recent trends in inflation and the fact that many seniors are still having a hard time with money. The 2025 COLA will likely be closely looked at by both people who receive Social Security benefits and lawmakers and advocacy groups who are still arguing about how to best make sure that benefits keep up with the cost of living.
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