Tens of millions of seniors will gain from a new cost-of-living adjustment that will be made to their Social Security payments in January. With the 2.5% rise, people will be able to better afford the higher prices of gas, food, and other goods and services.
Officials from the agency say that the average receiver will get an extra $50 every month. People who get Social Security had their payments go up by 3.2% in 2024. However, some seniors are worried that this year’s raise will not be enough to meet their needs.
The Social Security Administration will start mailing beneficiaries in early December to let them know about their new payout amount. About 7.5 million people who get Supplemental Security Income will start getting their payments changed on December 31.
Supplemental Security Income pays people and kids who meet certain income standards and are eligible for Social Security benefits every month.
Social Security will change as we know it in 2025
A little more than 72.5 million people, like children, disabled people, and retired, get money from Social Security. Income taxes and payroll taxes for Social Security pay for the scheme.
People who work pay taxes that the government uses to give benefits to retirees, disabled people, workers whose families have died, and beneficiaries’ children.
This year, the Social Security payroll tax will be charged on the first $168,600 of wages. In 2025, it will be $176,100 with no change.
The money is used to pay present beneficiaries first, and then any extra is sent to the Social Security trust fund. Along with income taxes, some of the money in the trust is used to make payments in the future.
To figure out how much Social Security you will get, the government takes a percentage of your highest salary from the last 35 years of work and factors in when you decide to start getting payments.
How does the Bureau of Labour Statistics calculate the COLA increase?
The Consumer Price Index from the Bureau of Labor Statistics is used to figure out the COLA.
However, some people want to use a different index that looks at how prices change based on what older people buy, like how much food, healthcare, and prescription drugs cost.
The gain in 2025 will be smaller because inflation is going down. It means that prices are going up less quickly than they were at the height of the COVID-19 crisis.
Because inflation was so high in 2023, people who collected benefits got a historically large 8.7% increase.
Problems with the fund in the future have been known for a long time. This is mostly because of changes in the population. When birth rates go down, fewer people are joining the work force, so payroll taxes go down as well.
At the same time, more Baby Boomers are leaving and getting Social Security. The annual report on Social Security and Medicare trustees, which came out in May, said that starting in 2035, the program’s trust fund will not be able to pay full payments.
The study shows that the government will only be able to pay out 83% of planned benefits if the trust fund runs out.
FED has warned about potential cuts in 2026
People who get Social Security payments, especially retirees, are likely to get bad news as the new cost-of-living adjustment (COLA) gets closer.
The Federal Reserve has warned that these important payouts could be cut even more in the coming years, which would mean that pensioners would get less in Social Security income increases.
Since inflation is now under control, the time when Social Security payments went up by a lot may be coming to an end. The FED has also warned recipients that their monthly payments will likely go down in 2026.
The purpose of COLA raises is to help seniors deal with inflation. However, because they are retroactive and based on past economic data, they may not fully address the financial problems seniors face, such as rising basic costs like food and energy.
The Federal Reserve warned that Social Security payments will get less COLA adjustments starting in 2026. This makes it even more important for retirees to plan for their long-term financial security, since the time of big COLA gains may be coming to an end.
Also see:-Social Security is going to change forever in 2025 – The problem is it won’t be enough for retirees
Leave a Reply