In 2024, seniors received a 3.2% increase in Social Security benefits, which was significantly lower than the 8.7% raise they received in 2023. While this raised the average benefit by approximately $59 per month, some seniors believed it was insufficient. There is anticipation among many seniors that the cost-of-living adjustment for 2025 will provide the necessary assistance they need.
The official announcement for the 2025 COLA is still a few months away, but there are indications that it may be lower compared to the increases seen in recent years. However, there are some positive aspects to consider amidst this information.
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The Social Security COLA for 2025 is expected to be lower than 3.2%.
The government doesn’t exert influence or control. Cost of Living Adjustment for Social Security The number is not randomly generated but is calculated by comparing the average inflation data in the third quarter from one year to the next. While it may sound complex, it is a straightforward process.
Essentially, the Social Security Administration calculates the Cost of Living Adjustment (COLA) by averaging the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) figures for July, August, and September of the current year and comparing it to the average of the same months from the previous year. The percentage difference between these two averages determines the COLA.
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased by approximately 3.2% from the third quarter of 2022 to 2023, leading to a 3.2% Cost of Living Adjustment (COLA) for 2024. As we are currently in the third quarter of 2024, the COLA for 2025 is yet to be determined and will be revealed in October. However, we can speculate on the potential COLA for 2025 based on the CPI-W data observed thus far.
The values are still increasing, however, the rate of increase is slower compared to previous years. This gradual growth is expected to persist, potentially resulting in a lower cost-of-living adjustment (COLA) in 2025. The Senior Citizens League (TSCL) supports this prediction, forecasting a COLA of 2.63%. This adjustment would elevate the average monthly retirement benefit from $1,918 to $1,968, representing a $50 rise.
The implications for older individuals
While receiving a small Social Security COLA next year may be disheartening, there is a positive aspect to consider. With lower COLAs, it indicates that inflation rates are also low, which could result in retirees not facing significant financial pressure on their budgets.
After the government releases the official COLA, you can predict the amount your payments will be in the upcoming year. The Social Security Administration will send out individualized COLA notifications in December. By understanding the value of your payments for 2025, you can prepare your budget for the following year.
If you have doubts about the adequacy of your Social Security benefits, you may need to depend more on your own savings or explore alternative methods to cover your expenses. This could include taking on part-time work during retirement, cutting down on costs, or seeking additional assistance from government programs. It is advisable to prepare a financial plan ahead of time to determine precisely how much you can manage to spend each month as you approach the year 2025.
