In 2024, Social Security beneficiaries received a 3.2% increase in their payments, which was the third-largest adjustment since 2011. This raised the average retiree’s monthly Social Security income by about $59. Despite this increase, a significant number of seniors expressed dissatisfaction with the adjustment. Approximately 63% of seniors believed that the cost-of-living adjustment was inadequate in meeting their needs. Research conducted by The Motley Fool on Social Security cost-of-living adjustments. .
As the 2025 COLA announcement by the government approaches in a few months, there is anticipation for positive updates. While the exact raise for beneficiaries next year remains uncertain, the current data suggests promising possibilities.
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The cost of living adjustment for 2025 is expected to be lower than that of 2024.
The official announcement for 2025 will be made by the government. Cost of Living Adjustment for Social Security In October, retirees are expected to receive a smaller increase compared to the past three years, mainly due to the decrease in inflation rates.
COLAs are determined by the Social Security Administration based on the average inflation data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) during the third quarter of the current and previous years. This data reflects the fluctuating costs of a selected group of goods and services over a period of time.
During periods of high inflation, cost of living adjustments (COLAs) increase, whereas during times of inflation decline, COLAs decrease. While this system may seem effective at first glance, a significant problem arises. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) does not reflect the expenditure habits of older individuals, which frequently differ from those of urban workers.
The CPI-E is used to monitor the expenses of older individuals, and some believe it should be used to determine cost-of-living adjustments instead. Research indicates that using this index would lead to higher COLAs in the majority of years. Despite the widespread support for this transition, it does not seem likely to happen in the near future.
The most recent projection for the 2025 Cost of Living Adjustment (COLA) is 2.57%, as reported by The Senior Citizens League (TSCL). This increase would mean an additional $49 per month for the average monthly benefit of $1,918 as of June 2024. While this may not be a significant amount of money, for some individuals, it may not be enough to offset the rising expenses due to inflation in recent years.
Activities that older individuals can engage in
Seniors may face challenges if there is a reduced cost-of-living adjustment (COLA) in 2025, particularly if they depend mainly or solely on Social Security. After the government reveals the official COLA in October, individuals can predict their benefits for the following year. Additionally, the Social Security Administration will issue customized COLA notifications in December.
Once you have an idea of the extent to which your payments will stretch in 2025, you can start strategizing on how to manage the rest of your expenses. It will be crucial to rely on your personal savings more as time goes on. If you do not have any saved up, you may need to explore other options. different sources of income for retirement , such as leasing a vacant property, working part-time, or seeking additional government assistance to cover your basic expenses.
