Seniors should brace themselves for a modest rise in their Social Security benefits next year. The projected annual cost-of-living adjustment (COLA) for 2025 is expected to be around 2.6%. This is a decrease from 3.2% in 2024, which resulted in an average monthly benefit increase of over $50, and significantly lower than the 8.7% COLA adjustment seen two years prior.
This anticipated adjustment is due to a decline in inflation rates, which, while beneficial overall, does not align with rising costs that many seniors face. Recent data from the Bureau of Labor Statistics indicates that consumer prices rose by 2.9% compared to the previous year, a slight decrease from June’s 3% increase.
The COLA is determined by averaging inflation data for the third quarter, specifically for July, August, and September 2024, and comparing it to the previous year’s data based on the Consumer Price Index for urban wage earners and clerical workers.
The actual COLA for 2025 will be officially announced by the Social Security Administration in mid-October, following the release of September’s CPI data. Shannon Benton, executive director of the Senior Citizens League, stated that a significantly lower COLA is expected after last year’s adjustment.
Despite overall inflation easing, costs for essential items such as housing, electricity, and medical services, which consume a large share of seniors’ budgets, continue to rise. Many seniors struggle to manage their finances as these necessary expenses outpace general inflation rates.
Mary Johnson, a policy analyst for Social Security and Medicare, noted that while inflation may have slowed, the prices for critical services like healthcare and housing remain high. The shelter index alone saw a 0.4% increase in July, up 5.1% from the previous year.
This situation poses a challenge for seniors, particularly since Social Security benefits have not consistently kept pace with the actual cost of living. Since 2010, the average annual increase in Social Security COLAs has been just 3.9%. In a recent survey by the Senior Citizens League, nearly half of respondents reported simply “getting by for now,” with over a quarter expressing difficulties in affording basic necessities.
For many retirees, Social Security constitutes a significant portion of their income, with about half relying on it for at least half of their earnings and one in four depending on it for 90% of their income. A projected 2.6% increase in benefits will not significantly alleviate these financial pressures. Benton remarked that the anticipated COLA does not adequately reflect the true increase in living expenses, leaving many retirees struggling to maintain a decent quality of life.