The Social Security Administration will soon announce the next COLA raise, which will take effect in January 2025. October is getting close. Maintain a level head and an open mind, no matter how stressed you are about this number.
You will be better able to handle and gain from this change if you learn more about it. It does not matter if this is your first time getting COLA or getting Social Security payments. You will be affected by this problem in the future, and it will be different for each program.
That is why it is important to know how everything works and how much money this change will cost in the end. Find out how Social Security will be changed by reading on.
The exact amount of the cost of living adjustment (COLA) for 2025 will be released on October 10, but the latest estimate from the Senior Citizens League suggests that it could be around 2.5%.
What is known as the cost of living adjustment (COLA)?
You know how prices for everything go up every year? Have you ever noticed that the prices of gas and public transit tickets go up?
Many of us will be disappointed to find that the increases, when added together, are more than our incomes can handle.
This will mean that we can not buy as many of the things we are used to or even at all. This is known as a loss of buying power.
This issue is not just with workers’ pay; it also affects the money that seniors and other vulnerable groups get from Social Security checks.
This means that Americans who do not have any other income sources or whose sources are limited will have to think hard about what they can afford from year to year and, God forbid, month to month if their monthly payments are not changed.
This is where the COLA came from. It is an index that takes this issue into account and is used to change a lot of things about the Social Security Administration’s programs, like the maximum taxable earnings, the Social Security disability thresholds, the resources for Supplemental Security Income (SSI), and the income limits.
How is COLA calculated?
Many parts of the process are easy enough that you can do them by yourself. The main source of information, on the other hand, is a little harder to figure out.
It comes from a different measure called the CPI-W, which stands for “Consumer Price Index for Wage Earners and Clerical Workers.” As the name suggests, a consumer price index is a number that shows how the prices of a group of goods or services have changed over time.
This shows how much inflation there has been in the economy during that time. About 200 goods and services will be put together in the CPI-W.
But keeping an eye on changes in prices alone is not enough because it does not show how someone who might get Social Security would spend their money.
Because of this, price changes have been tamed and weighted to reflect the buying habits of families where at least half of the income comes from a wage or clerical job.
The Bureau of Labor Statistics (BLS) does this every month. For COLA, SSA will choose data from the third quarter of the year (July, August, and September), average it, and then compare it to the same calculation from the previous year to see how much it has changed.
A number that can be used to show how inflation affects Social Security checks is found in this way.
When will COLA be applied?
Once you understand the method, it is important to make a detailed schedule. The public will know the three CPI-W numbers they need by October 10th, since BSL usually needs at least two weeks to figure out their CPI-W.
After a few days, SSA will officially announce their COLA amount for the next year. This will go into effect on December 31, 2024, so you will be able to get your higher payment in January.
