There is only one week left until the official announcement of the 2025 cost of living adjustment (COLA). Beneficiaries should be aware of one last important change regarding this upcoming raise.
Experts on retirement have given their final figures for the Cost of Living Adjustment (COLA) before it is made public next week. The Social Security COLA is meant to help benefits keep up with inflation so that people do not lose buying power over time.
Every October, the Bureau of Labor Statistics figures out the Consumer Price Index, which is used to figure out inflation. The movie is set to come out on October 10.
The last few COLAs have been some of the biggest ever. For example, benefits received in 2023 saw an amazing 8.7 percent increase because of the coronavirus outbreak, which caused prices to rise very quickly.
Even though there was a 3.2% raise in 2024, seniors should not expect another one this big this time. Many experts, including Mary Johnson, an independent Social Security and Medicare policy analyst, say that about 2.5% of payments made in 2025 will be given out.
She said that in the coming year, a person receiving benefits from the Social Security Administration (SSA) who currently gets $1,870 per month would see an increase in their monthly payment of about $46.80.
The new COLA increase could be the lowest increase since 2021
Johnson told Newsweek that the 2025 COLAs for Social Security recipients will be the lowest since 2021. This is true even though the costs of things like food, housing, car insurance, and all kinds of repairs and maintenance keep going up.
It is still about 2.5%, which is about average, even though it might be the lowest COLA rise since 2021. As the CEO and founder of New Horizon Retirement Solutions, Kristin Petersmarck agrees with the 2.5% number.
She also said that this seems to be in line with the Fed’s recent 50 basis point cut in interest rates and the average 2.6% COLA change over the past 20 years.
A retirement expert with PlanPrep, Burt Williamson, on the other hand, thinks it will go up by at least 3%.
He told Newsweek that he thought Social Security benefits would go up by at least 3% this year because oil prices are so unstable and are the main thing keeping inflation in check.
They need to think about how those costs will go up in the winter, which will make life more expensive for older people. It is important to keep in mind that any rate below 3 percent will hurt most seniors, whose costs have gone up a lot in the past few years.
Seniors will only be aware of the true COLA’s impact until later this year
Lower inflation is closely linked to a smaller COLA, but seniors may not know how much the increase really costs them until later this year.
Newsweek talked to Robert Brokamp, a senior retirement planner at The Motley Fool. He said that we will not know if it will be a good or bad COLA until January 2026, when we know how strong inflation was in 2025.
When inflation rates are flat or going down, like they have been for a few months now, a 2.5% increase in Social Security payments makes sense. This is especially true if inflation is lower than expected in 2025.
Also, Brandy Burch, CEO of Benefit Bay, told Newsweek that this year’s increase would not be that big because healthcare, housing, and energy costs are all going up faster than the CPI-W index.
The Consumer Price Index for All Urban Consumers (CPI-U) shows that housing costs have gone up by 5.2% since August 2023, which is more than double the expected COLA rise. Medical costs went up by 3.2% during the same time frame.
Burch said that benefit raises are definitely a good thing, but 2.5% might not be enough to cover the costs that retirees usually have to pay for. Seniors are still feeling the pinch from the high costs that will not go away.
So, while the extra money is good, it might not be enough to make up for the rising cost of living, which affects how much they spend every day.
Also see:-In 2025, SSDI checks will also rise. This week, Social Security will formally announce it
