It doesn’t matter if you get a Social Security check now or are looking forward to getting one in the future. It is always a good idea to know as much as you can about how the economy will affect your benefits and how much they are likely to go up every year. This may seem like a difficult process, but once you understand how it works in general, you can start to plan how you will make money in the future.
Why is an increase needed for your Social Security check?
Some things about your life have always been true, but now that you get a Social Security check, you may be more aware of them. It’s when the prices of everything you buy and use go up. This doesn’t stand out as much if you’re working because you can get a raise or switch jobs to make more money this way.
Because of this, the effect is balanced by the rise in your income compared to the rise in prices. When you’re retired, on the other hand, and your only source of income is your monthly benefits, you may not have as many choices, and it will be clearer how much the change in prices would affect your ability to keep up the same level of living.
The cost-of-living increase, or COLA, was created in 1975 as a way to deal with this problem. Before, any changes to the amount of a Social Security check needed special acts of Congress to be made. From now on, changes would be made on a regular basis and based on inflation.
This will make sure that the amount of money you get from your Social Security check keeps up with inflation. This means that while you are getting benefits from SSA, your spending power will stay pretty much the same.
How is the increase in your Social Security check defined?
The computed COLA tells you how much your Social Security income will go up each year. A more general way to explain the method is that it is based on the average of a different index known as the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers). Because of this, it would be better to start with that word.
A price index is an econometric tool that figures out how prices change over time and gives you a number that shows the change. CPI-W is a subset of a price index. In the case of CPI-W, it keeps an eye on around 200 goods and services.
It is weighted, though, so not all price changes will have the same effect on the index. The goods that have the biggest effect are those that families whose wage earners or office workers make at least half of their income buy.
Now, to get the COLA value, the Social Security Administration averages the CPI-W for the third quarter of the year (July, August, and September) and then figures out the percentage change from the previous year’s estimate. The cost of living increase is then used to change not only the amount of your Social Security check, but also other amounts of money that SSA has.
How much can you expect from your Social Security check?
The amount of your Social Security check will rely on a number of things, including your full retirement age, how long you worked, how much you contributed, and the type of disability you have. This is especially true for people who are eligible for Social Security Disability Insurance (SSDI) benefits.
When the COVID-19 plague hit the world economy after 2020, prices went through the roof. This pattern is slowly changing. The Senior Citizens League, a non-profit that works on problems that affect seniors, thinks that the COLA will be 2.6% in 2025. This rise is likely to happen in January 2025.