With just over a month till Christmas and the New Year, many retirees and public assistance recipients are beginning to plan for the 2025 cost of living increase (COLA) they will receive in January, which will benefit their finances and Social Security checks.
The adjustment occurs each year, but because the situation has changed dramatically, particularly after the epidemic, assessing the situation will be critical in order to make the best possible decisions.
The Social Security Administration (SSA) announced on October 10 that the 2.5% COLA will be applied to all benefit checks beginning in January 2025. This will help the checks keep up with inflation, allowing beneficiaries to maintain their spending power over time.
The SSA administers five programs, including retirement, survivors, Social Security Disability Insurance, and Supplemental Security Income, and all recipients will get the same percentage of adjustment regardless of the amount in the check.
This adjustment has been disappointing for many, particularly because it is lesser than it has been in recent years, and the 2024 COLA was rapidly eclipsed by inflation in the first quarter of the year, leaving the COLA meaningless. Fear of this happening again has made beneficiaries less confident in their new higher benefit.
How is the Social Security COLA calculated?
Every year, the SSA calculates the COLA using the Consumer Price Index for Urban Wage Earners and Clerical Workers, a measure of the average change in prices for consumer goods and services published monthly by the Bureau of Labor Statistics.
This has proven to be problematic, particularly among senior activists, because the index is clearly geared toward the demands of young professionals, and because the majority of recipients are seniors, it does not adequately reflect their needs and expenses.
In response to the recent COLA announcement, TSCL Executive Director Shannon Benton issued a statement. “Our research shows that 67% of seniors depend on Social Security for more than half their income and that 62 percent worry their retirement income won’t even cover essentials like groceries and medical bills.”
According to the league, in a recent study of 3,000 older Americans, 72% said that updating the calculation to an index that properly represents seniors’ shifting costs should be Congress’ top priority.
There have been a few solutions proposed, but one of the most popular and logical is to use the CPI-E, which is the same index as the CPI-W and uses the same metrics, but weights them towards the needs and expenses of those over the age of 62, giving higher priority to expenses such as healthcare and housing.
Even though this may appear unfair, the reality is that almost everyone who is in a vulnerable situation and requires government assistance has the same concerns, and because the CPI-E has consistently been shown to be a higher adjustment, using it could increase benefits across the board and benefit all beneficiaries, not just senior citizens.
If you have not computed your benefits independently, don’t panic; the SSA will send you letters soon detailing the modification and its impact on your specific benefits. If you already have a my Social Security Account, the message will also be posted online.
Which government benefits make adjustments using COLA?
Contrary to popular belief, the SSA is not the only government agency that uses the COLA to adjust benefits; the metric is also used to calculate Medicare and Supplemental Nutrition Assistance Program (SNAP) increases for those who qualify, making it one of the most versatile metrics beneficiaries should be aware of.
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