In two weeks, the new cost of living adjustment (COLA) for 2025 will be made public. People who get Social Security checks will be able to tell how much they will go up when the inflation numbers come out.
If you are retired and getting Social Security benefits, you should pay attention to the yearly cost-of-living adjustment. This is a very important issue. The Social Security Administration (SSA) says that the payments that seniors get from Social Security should be raised every year by the rate of inflation.
A COLA predictor, which is based on a number of factors, such as the Consumer Price Index report, tells us how much the payments to seniors will go up from one year to the next.
Many people think that benefits will go up less this year because the CPI has been going up much more slowly. This is good for the fight for lower interest rates but bad for seniors. The final COLA for 2025 is based on changes in the CPI-W from July to September and will be released in October.
This means that there is some uncertainty about the exact number that will be reported. If you want to know where next year’s COLA adjustment will end up, let’s look at the numbers and see what the experts think will happen in 2025.
How much will Social Security checks increase with the 2025 COLA boost?
Based on what analysts think will happen, the 2025 COLA has been steadily dropped. There has been less inflation in the economy and the Federal Reserve has been raising interest rates. This should lead to a more reasonable increase.
Many people think it will be about 2.5% next year, since this change is based on inflationary concerns. If this increase is passed, it will give seniors an extra $48. However, there is always a chance that a slightly higher COLA for 2025 will happen if the next CPI report is higher than expected.
Since inflation data from July to September was used to figure out this increase, seniors will probably see less of an increase than they would have if data from earlier in the year had been used. Many people are disappointed by this, but the huge 8.7% rise in the COLA in 2023 helped millions of households deal with higher prices for necessities.
Many analysts are predicting a 2.5% COLA increase, but a lot of people were hoping for an increase like the 3.2% rise last year. Even though both last year’s rise and this year’s expected rise are in line with past norms, the drop in inflation is hurting seniors the most.
The CPI-W statistics from the third quarter is used to figure out the COLA. A retiree’s net benefit may change because of taxes and Medicare Part B premiums. As long as interest that isn’t taxed is added to total adjusted gross income and half of benefits, up to 85% of Social Security benefits may be taxed.
If these conditions stay the same, more recipients may have to pay taxes in the future. During his campaign, Trump said that getting rid of these taxes would “help seniors on fixed incomes” by taking taxes out of Social Security payments.
It will also be interesting to see how the Harris government responds to these actions because the senior population is very important politically. People whose combined income is between $25,000 and $34,000, or $32,000 and $44,000 for married couples, could be taxed on up to 50% of their benefits.
The final inflation calculation is also likely to stay a contentious issue. The yearly increases in the cost of living are meant to help seniors keep up with the rate of inflation and keep their buying power. People argue about how the CPI is calculated, and some seniors say that even with these price hikes, they are still behind.
The goal is to keep up the standard of living that middle-class Americans earn after serving their country for a lifetime. This is a promise that everyone wants to see kept when they retire. Also, there are still some problems with the funds that need to be fixed by future administrations.
For example, how does the trust that pays for these SSA distributions get its money? There will likely need to be these discussions sooner rather than later because every day 10,000 baby boomers are getting close to retirement age.
These issues have been put off for decades. What seniors can expect for 2025 is a COLA of about 2.5%, give or take a few basis points. That’s not a lot.
Also See:- Change in US Retirement Age and Social Security Payments