Social Security COLA Increase: The recent Social Security cost of living adjustment (COLA) forecast has many seniors perplexed as to how they will be able to extend their benefits in the face of inflation.
The Senior Citizens League (TSCL) has just projected the COLA for 2025, indicating that benefits will increase by 2.66 percent for beneficiaries. The estimate was previously established at between 2.6 and 2.4 percent.
Implementing a 2.66 percent increase would presumably result in monthly payment increases of approximately $50 for the majority of recipients.
Although the monthly benefit increase is better than expected, many seniors expected a bigger boost to combat inflation.
The Social Security Administration adjusts payment amounts annually based on the consumer price index, but the impact on subsistence levels varies per person.
“While COLA payments will increase to offset the effects of inflation, many are concerned that the potential percentage jump will not be sufficient to meet the majority of senior citizens’ financial needs,” said Alex Beene, an instructor of financial literacy at the University of Tennessee at Martin, upon speaking with Newsweek. “Daily expenses for this age group continue to rise, but the uptick in healthcare costs is putting additional strain on them, and COLA payments may not be enough to match that uptick.”
According to TSCL, seniors will likely be subject to increased Medicare Parts premiums as well.
The Medicare Trustee report from this month projected a monthly increase of $10.30 in Part B premiums, bringing the total to $185. This increase is in addition to the housing, food, and transportation inflation rates seen across the nation.
“The average Social Security benefit increased by $50 in 2024; however, the reimbursement for Medicare Part B premium increases amounted to $9.80, resulting in a monthly benefit increase of $40.20.” “Seniors will likely continue to experience financial insecurity to the same extent next year as they have this year, given the projected 2.66 percent COLA for 2025,” TSCL executive director Shannon Benton said in a statement.
Social Security COLA Estimate for 2025 Increases, but Medicare Part B Premium could Cancel it Out
The Consumer Price Index for Urban Wage Earners and Clerical Laborers (CPI-W) increase for the third quarter of the previous year determines the COLA for each year. The official COLA calculation for 2025 will therefore not occur until later in the year.
Numerous financial experts have expressed skepticism regarding the CPI-W’s ability to accurately forecast inflation for the elderly, with many recommending the consumer price index for the elderly (CPI-E).
Social Security payments increased by 3.2% in 2024 as a result of the COLA, following a more substantial increase of 8.7% the previous year. According to the TSCL 2024 Senior Survey, approximately 71 percent of seniors reported that the rise in household expenses they encountered exceeded the 3.2 percent increase resulting from the COLA.
Finance expert and founder/CEO of michaelryanmoney.com Michael Ryan told Newsweek, “The majority of seniors continue to feel that their costs are increasing faster than those annual adjustments.” “So while the COLA certainly helps, it often still doesn’t fully cover the real inflation draining seniors’ buying power.”
Seniors who receive inadequate Social Security benefits will frequently require supplementary sources of income, such as 401(k), IRAs, or alternative investment accounts.
“At the end of the day, any COLA increase is better than none to prevent total Social Security stagnation,” according to Ryan. “However, the projected 2.6% increase in 2025 highlights the necessity for policymakers to reassess whether metrics such as the CPI-E would be more beneficial to the elderly by more precisely mirroring their distinct expenditure patterns. Our objective is to ensure that fixed incomes from government benefits maintain their purchasing power to the greatest extent possible over time.
