Some of the most important money that millions of people in the United States get is from Social Security (SSA). This program not only helps people who have lost their jobs by giving them important income support, but it also makes changes every year to make sure that the people who get help keep up with inflation.
These changes, which are called COLAs (Cost of Living Adjustments), are very important for figuring out how much people will get each month in their checks. This year, a lot of Americans are paying close attention to the September inflation report because it will tell them if their Social Security benefits will go up in a real way in 2025.
The cost-of-living adjustment (COLA) makes sure that Social Security payouts keep up with the cost of living. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is used by SSA to look at inflation statistics every year. As inflation goes up, so do Social Security payments.
What is COLA and how does it affect Social Security recipients?
If inflation stays the same or goes down, on the other hand, payouts may stay the same, though there has always been some kind of rise in the last few decades.
The first thing that is used to figure out COLA is inflation numbers from July, August, and September. SSA can figure out the percentage increase for next year once this information is complete. Most of the time, the official COLA statement takes place in October. The changes to Social Security payments start in January of the following year.
Inflation data from 2023: the key to COLA in 2025
A lot of retirees are looking for the September 2023 inflation report right now. The numbers from July and August have been made public so far, but the September numbers are still needed for SSA to have a full picture before they can announce the COLA for 2025. The inflation numbers for August will be released on September 11, and the numbers for September will be released on October 10.
If inflation keeps going up, it’s possible that the COLA for 2025 will show an increase in Social Security benefits. However, recent predictions show that this rise might be smaller than in previous years.
Projections for the 2025 COLA: what experts are saying
A group that helps seniors called the Senior Citizens League has already begun making its own predictions. They think that the COLA for 2025 might be about 2.57 percent. This number isn’t set in stone, but it would be less than the 3.2% raise that beneficiaries saw in 2024.
It’s important to remember that these numbers might change when the official September inflation data comes out. People who get Social Security might see a smaller rise if the 2.57% prediction comes true. This might not be enough to cover the rising costs of basic goods and services.
How COLA impacts retirees
For retired people, even a small rise in the COLA can have a big effect on their money. People on fixed incomes are hit the hardest by rising prices for basic things like food, housing, and medicine. COLA is supposed to help seniors deal with some of the financial problems that come with inflation, but some people say it doesn’t always reflect the real costs they face.
One of the main complaints is that the CPI-W, which is used to figure out COLA, doesn’t take into account costs like medical bills that seniors tend to have more of. There have been suggestions from experts that a consumer price index should be made just for old people, but this has not yet been done.
Impact of a lower COLA in 2025
Some figures say that the COLA for 2025 could be lower than it was in 2024. If this happens, many retirees could have trouble paying their bills. Since the cost of living keeps going up, a 2.57 percent raise might not be enough to keep Social Security recipients’ purchasing power.
People who are retired and depend on Social Security as their main or only source of income could be especially at risk. People in this situation might need to spend less or look for other ways to make money to make up the difference between the COLA change and the real rise in living costs.
Also See:- Why do you think the Cost-of-Living Adjustment for Social Security will be less in 2025?