In 2025, it is estimated that inflation will cause increases in the Social Security COLA, this causes greater adjustments than planned for beneficiaries. However, it may not be the best scenario, since the increase in expenses can cause a decrease in profits, causing additional and important financial challenges for the beneficiaries.
The Senior Citizens League, a non-partisan advocacy group, increased its prediction of the long-term cost of living adjustment (COLA) by 2025, according to this, it would go from 1.75% to 2%. This adjustment is due to the March consumer price index, which showed an increase of 3.5%, for those who work in administrative and urban salaried. Therefore, an increase of approximately $45 per month is expected for the regular beneficiary, coming from an increase of 2.6%. Last year, a 3.2% increase generated a monthly profit increase of about $50.
Social Security Payments Will Increase, but Not as Much as You Want
Social security payments will have an increase, and all payment dates have already been announced, to inform all beneficiaries. However, this increase does not come at a very easy time for beneficiaries, especially the elderly, since they face very high prices in various aspects of daily life. Which is something to worry about, since any additional increase in income will be reflected until January 2025.
Regarding the cost of living adjustments (COLA) of Social Security, there are important issues and one of them is time, since experts have made the warning about the perception of money in the future, compared to current financial funds.
This reality directly affects social security beneficiaries and is increasingly aggravated when inflation increases, a not very favorable increase that we are currently facing. The COLA calculations are based on data taken from the consumer price index (CPI), which tells us that the estimates are adjusted on a monthly basis, depending on the day-to-day economic situation.
However, the final amount for 2025 will largely depend on the average inflation rate in the third quarter of this year, compared to the same period last year. This way of performing the calculation creates great uncertainty, since the current projections are probably compromised by the economic fluctuations that may arise.
The Society of Citizens for Legislation (TSCL) indicated that there are still six months to collect more data, before making final decisions, this margin provides some flexibility to make adjustments in relation to economic changes and inflation that may occur, but it also generates that uncertainty for beneficiaries, since expectations in relation to future adjustments of social security payments may have some impact on any change in the economic situation throughout this period.
When Will the Final Social Security COLA Be Released?
Inflation, after its peak in June 2022, seemed to moderate, but recent figures reveal a worrying trend. The CPI-W index has increased steadily: 2.9% in January, 3.1% in February and 3.5% in March, the highest figure in seven months. This last data is alarming as it exceeds the 3.2% adjustment (COLA) in Social Security benefits, which implies a loss of purchasing power for the beneficiaries.
Although a COLA of 2.6% is forecast for next year, according to The Senior Citizens League, this represents insufficient relief in the face of rising prices. Faced with this uncertainty, retirees should prepare with a rigorous budget and consider options to increase their income, such as part-time jobs or investments in high-yield savings accounts in the face of recent interest rate hikes.