The estimated 70 million Americans who have Social Security benefits are expected to receive the smallest increase in their monthly checks since before the pandemic. Each year, Social Security benefits are subject to a yearly cost-of-living adjustment (COLA) that is based on inflation rates to ensure that monthly payments keep pace with rising costs.
Social Security beneficiaries obtained a COLA of 3.2% in 2024, a significant decrease from the COLA of 8.7% in 2023, which was the largest increase in the last 40 years, by 2025, using the current inflation data of the Consumer Price Index, it is expected that there will be a COLA of 2.66% in 2025, according to The Senior Citizens League.
Projected COLA Increment in 2025
The projected increase was 2.6% and would be the lowest since 2020, when profits per month increased by only 1.3%. “With a 2.66% COLA forecast for 2025, it looks like seniors will continue to suffer the same financial insecurity next year as they did this year,” said Shannon Benton, executive director of The Senior Citizens League.
The Senior Citizens League’s 2024 Senior Citizen Survey found that the overwhelming majority of respondents, 71%, indicated that the previous year’s 3.2% COLA wasn’t enough to keep up with rising household costs. That means a 2.66% increase next year could be even worse.
The cost of living adjustments are determined using data from the third quarter in the months of (July, August, and September) of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
The inflation of those three months is added up, averaged and then the comparison is made with the average of the third quarter of the year that passed, and the percentage difference between the current year and last year works as the COLA rate for the next year.
The Social Security Administration (SSA) makes an official announcement, the annual COLA, in the month of October, which means that beneficiaries have to wait a few more months before knowing exactly how much their benefits will increase.
In the year 2023, an average of almost 67 million U.S. citizens, per month, receive Social Security benefits, for more than $1 trillion in total, in benefits paid throughout the year, according to the SSA.
Social Security benefits account for about 30 percent of the income of Americans age 65 and older, the administration said.
Important Change in the the Social Security COLA Calculation
The new federal legislation is seeking to make a change in the COLA calculations in order to better align benefits with the actual expenses experienced by older people.
The Benefits Boost and COLA for Seniors Act, introduced by Rep. Ruben Gallego, D-Ariz., proposes making changes to the COLA calculation for those who receive Social Security benefits.
If enacted, this bill would require the use of the Consumer Price Index for Americans age 62 and older to determine the COLA, making a replacement for the current use of the Consumer Price Index for urban wage earners and Administrative workers (CPI-W).
The suggested change aims to provide a more accurate reflection of the inflation suffered by older people, especially in areas such as healthcare, food and housing. Advocates point out that the CPI-W does not correctly reflect the rising costs suffered by the elderly, which leads to insufficient adjustments in Social Security benefits.
