There is just over a month left until Christmas and the New Year. Many seniors and people who get government aid are already thinking about the future and how the 2025 cost of living increase (COLA) they will get in January will affect their money and Social Security checks.
The change happens every year, but things have changed a lot since the pandemic, so it will be important to look at the situation again in order to make the best decisions.
The Social Security Administration (SSA) said on October 10 that starting in January 2025, the 2.5% COLA will be added to all of their benefits checks. This will help the checks keep up with inflation so that the people who get them can still buy things over time.
The SSA is in charge of five programs: retirement, survivorship, Social Security Disability Insurance, and Supplemental Security Income. All of these programs will get the same percentage of the adjustment, no matter how much money is in the check.
This change has been disappointing for everyone, especially since it is less than what it has been in the past few years. On top of that, inflation quickly surpassed the 2024 COLA in the first quarter of the year, making the COLA useless. Fears that this will happen again have made beneficiaries less sure of their new, higher benefit.
How is the Social Security COLA calculated?
The Consumer Price Index for Urban Wage Earners and Clerical Workers, which is released every month by the Bureau of Labor Statistics, is used by the SSA to figure out the COLA every year. It shows the average change in prices for consumer goods and services.
This is a problem, especially for people who work to help seniors, because the index is clearly geared toward the needs of young professionals, and since most of the recipients are seniors, it doesn’t take their needs and costs into account correctly.
In a statement about the latest COLA news, TSCL Executive Director Shannon Benton said the following. “Our study shows that 67% of seniors get more than half of their income from Social Security, and 62% are afraid that their retirement income won’t even be enough to cover basic needs like food and medical bills.”
The league also said that a recent poll of 3,000 older Americans found that 72% of those asked thought that Congress should make it a top priority to change the calculation to an index that better shows how seniors’ costs are changing.
There are a few ideas for how to fix this problem, but one of the most popular and sensible is to use the CPI-E. This is the same index as the CPI-W and uses the same metrics, but it gives more weight to costs like housing and healthcare for people over 62.
This may seem unfair, but the truth is that almost everyone who is vulnerable and needs help from the government has the same worries. Using the CPI-E, which has been shown over and over to be a higher adjustment, could increase benefits for everyone, not just seniors.
Do not worry if you have not yet calculated your own benefits; the SSA will soon send out notices explaining the change and how it will affect your benefits. You will be able to see the notice online if you already have a my Social Security Account.
Which government benefits make adjustments using COLA?
Contrary to what most people think, the SSA is not the only government agency that uses the COLA to change benefits.
The metric is also used to figure out increases for people who qualify in Medicare and the Supplemental Nutrition Assistance Program (which includes food stamps and other programs). This makes it one of the most useful metrics that beneficiaries should know about.