When October comes around, millions of people who get Social Security, mostly retired, will find out how much their checks will go up. With the news of the new cost of living adjustment (COLA), all receivers should think about three important things.
The Social Security Administration (SSA) will announce the new cost of living increase amount for retirees and people who get Supplemental Security Income (SSI) on October 10.
The information will be shared after the group finds out the inflation rates for July through September of this year and contrasts them with the same quarter last year.
Social Security checks for retirees will change in October due to the cost of living adjustment
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) shows how much it costs to live in cities.
A fact sheet on the Social Security website says that Social Security benefits and Supplemental Security Income (SSI) payments are changed to represent these changes.
It is calculated by the Bureau of Labor Statistics (BLS) of the U.S. Department of Labor. By law, it is the official way for the Social Security Administration to figure out COLAs.
COLA is used to make sure that inflation does not make Social Security benefits and SSI payouts less valuable. Because of this, seniors should know about these three things:
COLA increase for 2025 is expected to be lower than this year’s
Based on what we know now, the COLA rise will likely be less than the COLA this year. The COLA is likely to be 2.5% in 2025.
The change in January is less than the 3.2% that recipients have seen in their monthly checks this year, even when the value of the dollar goes up or down.
Compared to the 8.7% prediction made last year for 2023, this year’s prediction would be much less than half of the 2025 prediction. Due to lower inflation, the COLA will be less than it has been in the past.
The Bureau of Economic Analysis (BEA), which EFE cites, says that the US personal consumption expenditures (PCE) price index dropped three-tenths from July to August, from 2.5% to 2.2%.
The Federal Reserve’s favorite way to measure changes in prices, PCE, went down more than expected. The prices of food and gas, on the other hand, have gone up from 2.6% in July to 2.7% now.
Medicare Part B deduction could also increase
When figuring out the COLA raise, you should also take into account the monthly payment for Medicare Part B that is taken out of your Social Security benefits.
If necessary, the Medicare Part B premium is raised every year to make sure it pays about 25% of what the Part B program is expected to cost. The SSA says on its website that any monthly payment increases will happen in January.
When the cost of Medicare Part B goes up a lot from year to year, retirees may also see a drop in their income because the extra COLA amount is cut.
Motley Fool estimates show that if the COLA turns out to be 2.5%, prices would go up by an average of $48 each month. A $12 monthly rise in Medicare Part B costs, on the other hand, would wipe out 25% of the higher COLA amount.
It is important to remember that Medicare recipients often get their new benefit level for the next year in December through the Message Center at Social Security and the COLA letter that is mailed to them.
COLA increase won’t be enough for retirees
In the past, COLAs have not been enough to help seniors meet their basic needs. In 2025, this will still be the case.
A non-governmental group called The Senior Citizens League (TSCL) released data last year showing that since 2000, Social Security recipients’ ability to buy things has dropped by 36% because of not having enough COLA funding.
The fact that the government does not use the CPI-E to figure out the COLA is another problem for seniors in this case. The CPI-E, or Consumer Price Index for the Elderly, keeps track of changes in the prices of goods and services that US people aged 62 and up buy.
Some groups, like the one above, say that this measure is better at ensuring economic justice for population members because it takes into account costs like prescription drugs. TSCL wants laws like the Social Security 2100 Act to be passed.
This bill was introduced in the House of Representatives by Democrat John Larson (CT-1). This bill would change how the COLA is calculated by making it mandatory to use the higher CPI-W or CPI-E.
