It is estimated that approximately 70 million Americans who have Social Security benefits available will have a new increase, it is said to be smaller than in previous years, this has not been seen in their monthly checks since before the pandemic Year-to-year, Social Security benefits are subject to an annual cost-of-living adjustment (COLA) that is based on inflation rates to ensure monthly payments keep pace with rising costs.
Social Security beneficiaries had a COLA of 3.2% in the year 2024, a significant drop in the COLA increment, of 8.7% in the year 2023, which was the most important increase in the last 4 decades, for In 2025, taking into account current inflation data from the Consumer Price Index, a COLA of 2.66% is expected, according to The Senior Citizens League.
The Projected Increase Would Be the Lowest in a Long Time
The projected increase was 2.66% and would be considered the lowest since 2020, when benefits per month increased only 1.3%. “With a 2.66% COLA forecast for 2025, it appears 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 Survey concluded that the overwhelming majority of respondents, 71%, indicated that the previous year’s COLA of 3.2% was not enough to keep up with rising household costs, meaning a 2.66% increase next year could be even worse.
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). Inflation for those three months is added, averaged, and then compared to the average for the third quarter of the past year, and the percentage difference between the current year and last year functions as the COLA rate for the following year.
The Social Security Administration (SSA) makes an official announcement of the annual COLA in the month of October.
We are already a few days away from the official COLA increases being announced. In 2023, an average of approximately 67 million U.S. citizens each month will receive Social Security benefit payments, totaling more than $1 trillion in benefits paid throughout the year, according to the SSA. Social Security benefits account for about 30% of the income of Americans age 65 and older, the administration said.
New federal legislation is seeking to make a change to COLA calculations to better align benefits with the actual expenses experienced by seniors. The Boosting Benefits and COLAs for Seniors Act, introduced by Rep. Rubén Gallego, D-Ariz., proposes making changes to the COLA calculation for those receiving Social Security benefits.
New Bill Proposes Using CPI-E for More Accurate Social Security COLA
If enacted, this bill would require the use of the Consumer Price Index for Americans age 62 and older to determine the COLA, replacing the current use of the CPI-W.
The suggested change aims to provide a more accurate reflection of the inflation experienced by older people, especially in areas such as healthcare, food, and housing. Advocates say the CPI-W does not accurately reflect the rising costs experienced by seniors, leading to insufficient adjustments to Social Security benefits.
Certified financial planner Matt Frankel advocated for a change in the COLA calculation method, based on the Consumer Price Index for the Elderly (CPI-E), which measures price changes specifically in spending patterns of Americans over age 62, which is the earliest age at which a person can start claiming Social Security retirement checks, says this is because if it had been used in recent years , would have meant more money in retirees’ pockets.
An SSA spokesperson said, “The COLA is set by law and is based on the percentage increase in the consumer price index for urban wage earners and clerical workers from the third quarter of last year to the third quarter of the current year.” .
Changing the method of calculating Social Security benefits has already been proposed before; at the beginning of this year, Democratic legislators proposed the Benefit Increase and Cost-of-Living Adjustments for Seniors Act, which would use the CPI -E to measure profit increases.