The Social Security Administration has announced a 2.5% cost-of-living adjustment (COLA) for 2025, marking the smallest increase in four years. This adjustment will impact more than 72 million Americans, including retirees and those receiving Supplemental Security Income (SSI), beginning in January 2025
Highlights of the 2025 COLA:
Average Increase: Social Security beneficiaries will see an average increase of about $50 per month. This brings the typical monthly retirement payment to approximately $1,976.
Effective Dates: SSI payments reflecting the 2025 COLA will be distributed on December 31, 2024, with Social Security benefits showing the increase starting in January 2025.
Impact of Medicare: The COLA increase could be partially offset by rising Medicare Part B premiums, projected to increase from $174.80 to $185 per month. This could reduce the monthly COLA gains by around $10.20 for many beneficiaries.
Long-Term Financial Struggles: According to the National Council on Aging, about 14% of seniors remain in poverty, and nearly half of households with adults aged 60 and older still face financial hardship. The 2.5% increase, though helpful, may not be enough to meet the rising costs of essentials like food, housing, and healthcare.
Historical Context of COLA Adjustments
The 2025 COLA is a notable drop from the 3.2% increase in 2024 and the substantial 8.7% adjustment in 2023. Over the last decade, the average COLA increase has been about 2.6%. The largest adjustment in history occurred in 1981, with a 14.3% increase in benefits.
The Calculation Behind the 2025 COLA
The 2.5% COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from July to September 2024. The Social Security Administration compares the CPI-W from this period with the same months in the previous year to determine the adjustment percentage. While inflation has eased in recent months, it continues to affect daily expenses for seniors, particularly in areas such as healthcare and housing.
Concerns About Financial Security for Retirees
Many advocates for senior citizens, such as the Senior Citizens League, express concern that the COLA does not keep up with the true cost of living. A recent survey found that 65% of older adults now have monthly expenses exceeding $2,000, with many fearing that Social Security benefits will not cover their basic needs as inflation continues to strain their purchasing power.
Ramsey Alwin, CEO of the National Council on Aging, emphasized the importance of ensuring that Social Security keeps pace with retirees’ financial challenges, noting that over 11,000 people turn 65 every day.
What This Means for You?
If you’re one of the millions of Americans relying on Social Security, expect to see your updated benefit amount starting in early December via mail or online. For many, this adjustment is a necessary boost, but the rise in Medicare premiums and inflation will still pose challenges. Stay informed by checking your COLA notice online through the “my Social Security” portal, and keep an eye on upcoming Medicare announcements to fully understand your benefits in 2025.
To learn more, please visit www.ssa.gov/cola.
