2025 will see another cost-of-living adjustment for Social Security checks, but data shows these increases have not kept up with inflation.
Social Security COLA Falls Short of Inflation Demands
While the payments have increased by historically high percentages in recent years, they are not high enough to account for the true cost of living for retirees.
Retirement Dollars Lose Buying Power
The Senior Citizens League says that due to inflation and the fact that COLAs have not matched its pace, Social Security checks only go 80% as far as they did in 2010.
Retirees Worry About the Future
For retirees who rely on Social Security income, the reality is frightening. As the average cost of living continues to skyrocket, more Americans worry about their ability to afford basic necessities like food and housing.
2025 COLA Lower than Prior Years
Those on fixed incomes from Social Security will receive another cost of living adjustment in 2025, but it is much smaller than increases of recent years.
Social Security to Increase 2.6%
Social Security beneficiaries are expected to receive a 2.6% increase in their benefits in 2025, but the final figure will be decided in October.
Prior Years’ Increases
In 2022, the COLA was 5.9%, while 2023’s increase was 8.7%. 2024 benefits only increased by 3.2%, starting what appears to be a trend in slowly decreasing COLAs.
Wages Remain Low as Inflation Soars
Wages for working Americans have not increased either. The federal minimum wage has remained stagnant at $7.25 per hour since 2009. However, data from the Bureau of Labor Statistics shows that the cost of living for most Americans has increased by a staggering 36%.
How Social Security COLA is Calculated
At the end of the third quarter of each year, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is analyzed to determine the rate of inflation during the quarter.
Index Determines Amount of Increase
That data is then used to determine whether a Social Security increase will be given, and if so, how much it will be.
Advocates Push for Change
Financial experts from the AARP and the Senior Citizens League believe that a different index would more accurately measure the cost of living for retired Americans, giving a better indication of how much Social Security should be increased.
Elderly’s Spending a Better Measure
The Consumer Price Index for the Elderly (CPI-E) is based on spending by Americans over age 62, and advocates for the change believe it would better reflect how much money Social Security beneficiaries need.
Inflation Hits Seniors Harder
In fact, the CPI-E has consistently measured a higher rate of inflation throughout 2024 than the CPI-W, indicating that retirees have a higher cost of living than working Americans.
Increase Will Not Be Enough
This means that the COLA for Social Security income will likely be an underestimation of the actual rate of inflation for retirees.
Is Inflation Slowing Down?
While some analysts think that inflation is slowing significantly as measured by the CPI-W, others worry that it isn’t happening quickly enough. Whether a person is receiving Social Security income or not, they could still be struggling financially.
Most Americans Struggle to Get Ahead
MarketWatch indicated earlier this year that over two-thirds of Americans are living paycheck to paycheck.
Millions Living in Poverty
Forbes found that over a quarter of Americans have under $1,000 in savings, and the Census Bureau announced that as of 2021, there were nearly 40 million people in the country living under the poverty line.
Social Security Recipients Concerned
The financial situation for many Americans is dire, and the 67 million retirees, disabled people, and others who rely on Social Security to survive are worried that their income cannot keep up with the demands of inflation.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
