Following the announcement of the 2.5% cost-of-living adjustment (COLA) rise in October, many people began calculating their new Social Security payments to see how much, if any, it would improve their finances, and the results were less than positive.
The rise was computed using the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) and inflation data from the third quarter of the year. By then, efforts had been taken to reduce inflation, and the figure was low, which is desirable in theory.
Lower inflation and thus a lower COLA indicate that the economy is stabilising and that prices will not continue to rise, but it also implies that retirees will have less money to pay previously increasing expenses.
For individuals who wish to know how much advantages will rise with the cola, the following table may be useful:
| AGE | Current Average Retirement Benefit | Retirement Benefit After COLA | Change in Monthly Social Security Benefit |
| 62 | $1,298.26 | $1,330.72 | $32.46 |
| 67 | $1,563.06 | $1,602.14 | $39.08 |
| 70 | $2,037.54 | $2,088.48 | $50.94 |
Whether or not the reduced rise is a good thing, many people are questioning the index used to determine it.
They argue that the CPI-W, which tracks daily spending on items such as food, housing, and consumer goods for workers, does not accurately capture the impact of inflation on retirees and that a new index, the Consumer Price Index for Americans Aged 62 and Up (CPI-E), should be used because it more accurately reflects the costs faced by older adults.
Shannon Benton, executive director of The Senior Citizens League (TSCL), is a proponent of the change, saying in a statement, “This year represents another missed opportunity to grant seniors the financial relief they deserve by changing the COLA calculation from the CPI-W to the CPI-E, which would better reflect seniors’ changing expenses.”
Seniors and TSCL propose that Congress take prompt action to strengthen COLAs so that Americans can retire with dignity, such as implementing a 3% COLA and altering the COLA calculation from the CPI-W to the CPI-E.”
Congressman John Larson (Connecticut) likewise voiced his agreement with the horrible impact of the modest COLA, but provided no insights into possible alternatives. “The annual COLA is vital for Social Security beneficiaries to make ends meet, but 2.5% is not nearly enough for seniors living on fixed incomes.”
The Social security COLA insufficiency a compounded issue
The problem does not end with an insufficient COLA; increased Medicare premiums and deductibles will likely consume the majority of it. Most recipients pay Medicare premiums straight from Social Security, and when these rise, their benefits shrink.
In November, the Centres for Medicare & Medicaid Services (CMS) revealed the 2025 rates for Medicare premiums, deductibles, and coinsurance, including revisions for Medicare Part A, Part B, and income-related monthly premiums for Medicare Part D. The rise is significant.
Medicare Part B’s normal monthly payment will climb to $185.00 in 2025, up $10.30, and the yearly deductible will rise by $17, from $240 in 2024 to $257 in 2025. And this is only one of the components.
This is not an isolated increase; numerous things, including groceries, housing, and petrol, have risen in recent years, forcing seniors to dive into their savings to meet the gap between their benefits and their expenses, leaving many in a perilous situation.
Despite the fact that a lower COLA is beneficial since it implies prices would not rise as quickly, changes are made after the fact, and when they are as low as this one, they can make seniors feel as if they are drowning in bills with no end in sight.