As we move into October, people are looking forward to hearing about Social Security’s Cost of Living Adjustment (COLA) for 2025.
This change is made every year to try to balance out inflation and make sure that benefits keep up with the higher cost of living. Forecasts for now, though, say that the COLA for next year might not live up to expectations.
Analysts think that the COLA for 2025 could be as low as 3.2%, which is a big drop from the 8.7% that was put in place in 2024. A big reason for this drop is the drop in inflation that has happened in the economy in the last few months.
Many people who get Social Security are worried about this news because even a small rise in payments can make it much harder for them to pay for basic needs, especially since prices for goods and services are still high.
Implications of a Low COLA
The possible drop in the COLA could affect more than just people who get Social Security. It could also have effects on the business as a whole.
With benefits going up less, a lot of people will probably have to change their budgets and decide how to spend their money. This might cause people to spend less, which could hurt small businesses and the economy as a whole.
A low COLA could also make more people need more government aid because people who get it may have to look for other ways to make money or get help. This makes things even harder for people who already depend on state and government aid to stay alive.
When will the official COLA be announced?
The official COLA figure will be released in October 2024, which will make beneficiaries and groups that look out for their interests even more excited.
As this date gets closer, it will be very important for people who get Social Security to know about any changes and get ready for how their finances might change.
CPI-E and CPI-W Inflation
The table below shows CPI-E and CPI-W inflation over the last few months. It helps you understand what inflation is and how it affects the COLA:
| Month | CPI-E Inflation | CPI-W Inflation |
|---|---|---|
| January | 3.5% | 2.9% |
| February | 3.4% | 3.1% |
| March | 3.7% | 3.5% |
| April | 3.6% | 3.4% |
| May | 3.6% | 3.3% |
| June | 3.3% | 2.9% |
| July | 3.2% | 2.9% |
| August | 2.9% | 2.4% |
| Average | 3.4% | 3.1% |
In conclusion, the prospects for the 2025 COLA is not good, and many Social Security recipients will have to deal with the harsh truth that their payments will go up less.
As the official release date gets closer, it is important for beneficiaries to stay up to date and think about how they can handle their money if a low adjustment is confirmed.
In the end, how we deal with this economic problem could affect the finances of millions of people.
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