The Social Security Administration announced on Thursday that Social Security recipients will only see a 2.5% increase in their monthly payments next year.
This is because inflation is still going down, which weakens the program’s yearly cost-of-living adjustment. When people retire in January, their monthly income will go up by about $50, to an average of $1,976.
About 68 million people get money from Social Security. People are very worried about the economy and the high cost of living, so the news comes less than a month before the election.
Social Security checks increase in 2025 might not be enough for retirees
The cost of living adjustment (COLA) for 2023 was 8.7%, which was the biggest rise in almost 40 years. It was meant to help disabled and elderly people deal with the sharp price increases that were happening at the time. It is a long way from the COLA for next year.
But when prices went up, the annual increases went down. This year, recipients only got a 3.2% rise. The yearly adjustment is based on a measure of inflation from the third quarter of this year.
It has gone down since its peak about two years ago at a level that has not been seen in 40 years.
The Consumer Price Index, which is a similar measure, went up 2.4% in September compared to the same month last year, the Bureau of Labour Statistics said Thursday.
But a lot of seniors and people who support them say that the yearly changes do not keep up with the rising cost of living, especially since prices have stayed high even though inflation has slowed down.
For example, CNN just recently told the story of Wally and Christina, who used to be medical transcriptionists and depend on their Social Security payments to pay their bills.
Before COVID-19, Christina could buy four or five bags of food and home goods at Walmart for $150. Now, if she is lucky, she can only get two bags for that amount of money.
Because they had to pay for the brake repair on their 1996 Dodge while putting off Christina’s nerve test, they were able to do it.
Despite most recent Social Security COLA increases, millions still struggle
But the most recent COLA raises have only gone up by a few percentage points, not enough to keep up. Christina says that is nothing compared to how much food have gone up.
To save money, she usually eats cereal for dinner. On paper, the annual change looks like it would be helpful, but it does not help us in any way.
According to new study from the Senior Citizens League, the COLA has not kept up with inflation in eight of the last fifteen adjustments, even though that is what it was supposed to do.
The study mostly looked at the yearly increases that came before the 2025 increase. In the past five years, only the 2023 change has done better than the rate of inflation.
The difference between the COLAs and inflation in other years was up to 1.1 percentage points. The league says that since 2010, the buying power of Social Security income has dropped by 20%.
People who retired that year would need an extra $370 a month, or $4,440 a year, on average, to make up for the value they lost. The automatic annual cost-of-living increase is one of the best and most unique things about Social Security.
In a statement, Nancy Altman, who runs the advocacy group Social Security Works, said that it is meant to make sure that payments do not go down over time.
Still, the current method for figuring out COLA understates the costs that Social Security recipients face. The Social Security COLA should take into account the fact that seniors spend a bigger chunk of their income on medical bills.
In addition, older people often do not make the whole change. Premiums for Medicare Part B may cut into the yearly rise. These costs are taken out of Social Security income every month automatically.
The most current report from the Medicare trustees says that the normal monthly premium will be $185 in 2025. This is more than $10 more than this year’s premium.
