Retirees to Face Disappointment – Social Security Check Increase Falls Short

Social Security’s cost-of-living adjustment (COLA) plays a crucial role in ensuring that retirees and beneficiaries maintain their purchasing power as inflation rises. However, as the latest projections suggest, the COLA increase for 2025 may not be as high as many had hoped.

For millions of retirees who rely on Social Security to make ends meet, this could mean a smaller-than-expected boost in their benefits, which might not be enough to offset rising costs. In this article, we’ll investigate how Social Security checks are adjusted, what the forecast looks like for 2025, and why it matters to you.

COLA

The Social Security Administration (SSA) uses COLA to adjust benefits each year, accounting for changes in the cost of goods and services due to inflation. This mechanism is designed to prevent retirees from losing purchasing power over time. For instance, if prices rise by 2% or more, the COLA ensures that Social Security benefits are adjusted accordingly to keep pace with inflation.

Before 1975, Congress adjusted Social Security benefits through legislative action, but this process was arbitrary and inconsistent. Since then, COLA has been tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a measure of inflation based on changes in the prices of a broad basket of goods and services. Every year, the CPI-W values for the third quarter—July, August, and September—are compared to the previous year’s third quarter. If there’s a significant increase in the CPI-W, a COLA is implemented.

COLA Projections

Unfortunately, the projected COLA for 2025 is not looking as promising as in previous years. After historic increases of 5.9% in 2022 and 8.7% in 2023, inflation has cooled, resulting in a lower COLA for 2024, which is estimated at 3.2%. This trend continues into 2025, with projections showing a much smaller COLA increase of around 2.6%.

Social Security and Medicare policy analyst Mary Johnson and The Senior Citizens League (TSCL) have both predicted that 2025’s COLA will match the 20-year average of 2.6%. While this percentage increase may seem modest, it still provides a critical adjustment for approximately 68 million beneficiaries. Based on an average monthly benefit of $1,782.74 in July 2024, a 2.6% increase would result in an additional $46.35 per month for the average recipient.

Although a 2.6% adjustment may help, it pales in comparison to the larger increases seen in recent years, and it might not fully cover rising living expenses like housing, healthcare, and groceries.

Beneficiaries

The importance of Social Security checks cannot be overstated. According to Gallup, 88% of retirees rely on Social Security as either a “major” or “minor” source of income. For many, especially those with little to no other savings, these checks are vital for covering everyday expenses. A lower COLA means that retirees will face tighter budgets as they try to keep up with inflation in key areas like healthcare, utilities, and food.

Over the past 20 years, COLA increases have averaged only 2.6%, including periods of deflation in 2010, 2011, and 2016, when no COLA was implemented. The last few years saw a break from this trend, as inflation soared to its highest levels in decades. The 5.9% increase in 2022 and the 8.7% increase in 2023 helped beneficiaries cope with these higher costs, but 2025’s COLA suggests that this period of rapid increases may be coming to an end.

Lower COLA

While the forecasted 2.6% COLA for 2025 will provide some relief, there are a few downsides that may leave retirees feeling unsatisfied.

1. Not Enough to Cover Real Costs: Even though COLA adjustments help, the increase might not be enough to cover rising costs in critical areas like housing and healthcare. These sectors often experience inflation rates that outpace the average increases in Social Security benefits, leaving beneficiaries struggling to make ends meet.
2. A Disappointing Trend After Historic Increases: After seeing significant increases in 2022 and 2023, the 2025 COLA will feel like a step back for many retirees. The excitement generated by the largest COLA in 41 years (8.7% in 2023) will be replaced by concern that benefits may once again lag behind real inflation.

Despite these challenges, the projected 2.6% COLA for 2025 will mark the first time in over 25 years that Social Security benefits have increased for four consecutive years. Since 2022, benefits have cumulatively risen by more than 22%, which helps, but not enough to erase the concerns of retirees living on a fixed income.

What to Expect

As inflation stabilizes, future COLAs will likely return to the lower, more modest levels seen over the past two decades. For beneficiaries, this means that while they will continue to receive yearly adjustments, the increases may not be enough to fully counter rising costs in sectors like housing, healthcare, and groceries.

Given this reality, retirees should plan carefully, budget wisely, and stay informed about how Social Security changes might impact their finances in the coming years.

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