The Social Security Cost of Living Adjustment (COLA) for 2025 was eagerly awaited, but the 2.5% rise announced in October has left many beneficiaries wondering how they can make ends meet with such a small boost.
Prior increases following the pandemic were substantial, and while they were due to high inflation rates, they did assist those in need in affording their lifestyle; however, given that the 2024 increase was quickly surpassed by inflation in the first six months of the year, many beneficiaries are concerned that the 2.5% increase will suffer the same fate and even sooner.
Beneficiaries receiving Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI) are most vulnerable and require the most assistance. The increase in Medicare Part B premiums by about $10 for 2025 has exacerbated their financial concerns. Although the average benefit increase is less than $50, the increased Medicare cost will significantly impact coverage. Leaving little money to cover all other increasing expenses.
The real impact of the COLA on Social Security benefits
A study by legal firm Atticus, conducted before the COLA announcement in October, found that three in five disability beneficiaries were “concerned about their future financial stability” after learning of the projected increase (which turned out to be accurate). Nearly 60% of individuals receiving disability benefits are considering obtaining an additional source of income to mitigate the impact, but this could disrupt their payments and affect their quality of life, so it is a delicate balance.
The study indicated that around 58% of respondents believe COLA increases should better reflect the cost of living.Congress has yet to implement a better index, despite previous discussions. In addition, 49% of participants believe the SSA should provide “extra financial support for essential costs, like healthcare and housing,” and 45% favor a minimum guaranteed benefits level for financial stability. Measures that are unlikely to be accepted.
According to Darcy Milburn, director of Social Security and health care policy at The Arc of the United States, SSI benefits should be increased without doubt. Congress should modernize outmoded policies that keep SSI users in poverty, penalize them for marrying, create impediments to employment, and limit their financial independence.
Some experts, such as Cliff Ambrose, founder and financial manager at Apex financial, maintain a positive attitude on a low COLA, arguing that while it “might seem like a bad thing at first,” the decreasing inflation is a good thing. When inflation is high, retirees need a higher COLA to cover growing costs for groceries, utilities, and healthcare. However, as inflation decreases, prices stabilize, and retirees may not require as substantial an adjustment to preserve their purchasing power. A lower COLA may result in a lesser boost in Social Security payouts, but it also implies that retirees’ dollars will go further due to slower price increases.
Shannon Benton, executive director of TSCL, believes Congress should take immediate action to strengthen COLAs and ensure Americans can retire with dignity, including instituting a minimum COLA of 3%.
The Motley Fool polled 2,000 American retirees on October 11, the day after the news, and discovered that 50% are considering leaving retirement to earn more money.
Also See:- The list of Social Security changes for 2025 is now official – What retirees should keep in mind