The Social Security Administration (SSA) is in charge of benefits that help a lot of people in the United States.
The SSA’s Office of Retirement and Disability Policy says that 70.6 million people will receive benefits in 2022. The SSA is very responsible for these people and does not take this lightly.
People usually just think of Social Security benefits as retirement benefits, but the SSA runs five different programs, each with its own rules and people who can get benefits.
All of these programs are grouped together under this name. A Cost of Living Adjustment, or COLA, happens to all of them every year, but that’s about all they have in common.
The Social Security COLA
This COLA was announced on October 10th and starts on January 1st. It makes sure that people who get what is called a “fixed benefit” don’t lose purchasing power over time.
In other words, unlike a job, they don’t get raises or the chance to go somewhere else for better pay, so the SSA has to make sure they can keep up with inflation and live a good life.
To find the COLA, you have to compare the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the year to the same time last year. The COLA is the number that comes out of this. It was 3.2% in 2024 and will be 2.5% in 2025.
A lot of people thought the COLA would be higher, especially given how unstable inflation has been in 2024. Also, a lot of seniors have complained that the CPI-W only tracks how much young city workers spend and not how much older people spend, who have higher costs for things like healthcare and other things that come with getting older.
As of 2024, the average monthly Social Security benefit for retired people is about $1927. The 2.5% increase would only bring that amount up to $1976 per month in 2025.
This is only about a $50 increase, which wouldn’t be enough to cover rising costs or possibly restore some of the savings that seniors have used to make ends meet since inflation went above the COLA in the first half of 2024.
Nancy Altman, president of Social Security Works and chair of the Strengthen Social Security Coalition, says, “One of the most important and unique things about Social Security is the automatic annual cost-of-living adjustment.” The current formula doesn’t fully account for older Americans’ costs, but the goal is to make sure that benefits don’t go down over time.
That problem could be fixed if the COLA was based on the Consumer Price Index for Elderly Consumers, or CPI-E. This measure of inflation looks at changes in prices based on how much money people aged 62 and up spend.
This isn’t just an idea; seniors across the country are quickly losing their savings, and the increase won’t help them get them back because it barely covers the rise in costs they’ve seen in the past few years.
Sherri Myers is 82 years old and lives in Pensacola City, Florida. This is her case. According to what she said, the raise she’ll get in January “won’t make a dent” in her daily obligations.
Even though she is old, she is still looking for a job to add to the money she gets from Social Security and a small pension. “Inflation has eaten up my savings,” she says in a few words. The cushion is gone, so I have nothing to fall back on.
She might benefit from getting rid of the GPO and the WEP, which would increase her benefits. However, this probably won’t be enough to make up for all the money she loses because of small changes that don’t really meet the needs of seniors.
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