Social Security Benefits Expected to Increase

The Social Security Administration is expected to announce a cost-of-living adjustment (COLA) for 2025, which could result in a significant increase in benefits for retirees.

Why it matters: The COLA is crucial for maintaining the purchasing power of Social Security benefits and ensuring that retirees can keep up with rising costs.

The details:

• The 2025 COLA is projected to be around 2.6% to 2.7%, based on recent estimates from The Senior Citizens League and independent analyst Mary Johnson.
• If the COLA reaches 2.7%, it would mark the first time in 32 years that there have been four consecutive COLAs of at least 2.7%.
• The average retired worker could see their monthly benefit increase by approximately $50, while workers with disabilities and survivor beneficiaries may see increases of $40 to $42 and $39 to $41, respectively.

However, despite the seemingly significant COLA, many argue that the current method of calculating the adjustment using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) does not accurately reflect the spending patterns and needs of retirees.

The concerns:

• A study by The Senior Citizens League found that since 2000, the cumulative increase in Social Security benefits due to COLAs has been 78%, while the cost of a typical retiree’s basket of goods and services has risen by 141.4%.
• This discrepancy has led to a 20% decline in the purchasing power of Social Security income since 2010.
• Retirees tend to spend a higher proportion of their income on shelter and medical care, which are not adequately weighted in the CPI-W.

What’s next: Lawmakers have proposed legislation, such as the Boosting Benefits and Cost of Living Adjustments (COLAs) for Seniors Act, to revise the criteria used for calculating COLAs to better reflect the expenses of the senior population. The official 2025 COLA will be announced in October 2024, and retirees are advised to plan their budgets accordingly and explore additional sources of retirement income if necessary.

Full story

Social Security benefits are expected to increase in 2025, according to the Social Security Administration (SSA). This annual adjustment is significant for seniors who rely on these benefits. The SSA operates similarly to an insurance plan, with both employees and employers contributing to the benefits through Social Security taxes.

A portion of an employee’s pay is deducted, and the employer contributes an equivalent amount. These contributions fund Social Security benefits and support related programs like the Survivors Program and the Disability Insurance Program. Inflation is one of the main factors influencing Social Security benefits.

As the cost of living increases, the purchasing power of Social Security benefits decreases. To mitigate this, the SSA employs a cost-of-living adjustment (COLA).

Social Security benefits adjustment update

This adjustment ensures that retirement income keeps pace with inflation. Currently, the COLA is determined using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). However, this index has been criticized for not accurately reflecting the spending patterns of seniors, as it is based on the expenditures of younger, working families.

In response, politicians have proposed the Boosting Benefits and Cost of Living Adjustments (COLAs) for Seniors Act. This proposed legislation aims to revise the criteria used for the COLA calculation to better reflect the expenses of the senior population. Senior organizations have voiced their support for this initiative, emphasizing the importance of an accurate adjustment for maintaining the quality of life for retirees.

The planned increase in Social Security benefits for 2025 will be announced in October of this year. Beneficiaries are encouraged to stay informed about these changes, as they directly impact their financial well-being.