The Social Security Administration is about to say how much more people who are qualified for retiree checks will get. The government will announce the cost-of-living adjustment (COLA) for Social Security for 2025 on Thursday.
This is expected to be bad news for people who are retired. Analysts are expecting a much lower COLA for 2019 than in previous years, which could make it harder for these beneficiaries to keep their retirement income stable.
Newsweek said earlier that many customers aren’t noticing a difference in their wallets even though inflation has gone down over the past year. Elizabeth Ayoola, a personal finance and retirement expert for NerdWallet, says that retirees may still be having a hard time with the rising cost of living if their savings aren’t keeping up with it.
Retiree checks might not be enough to counteract inflation
A 2.5% increase is less than the cost of living adjustment (COLA) that has been made every three years, but a lot of seniors will still think of it as a big increase. Alex Beene, a teacher of financial literacy at the University of Tennessee at Martin, says that it fits with the way things are in the economy right now because inflation finally seems to be going down.
This will change how much our annual rise in benefits from government programs goes up in the future. Ayoola says that the annual COLA is meant to keep Social Security’s purchasing power steady as inflation grows. Beneficiaries may not think this increase is important compared to 2023, but it’s normal and most likely won’t make a big difference for most of them.
Ayoola says that inflation is not always the same and that the prices of some foods, like eggs, and other needs have gone up more than the inflation rate as a whole. Beene also says that even though more benefits would be good, seniors would have to carefully plan how to spend the money they get, especially since many of them may have to pay more for things like food and medical care.
According to Alex Beene, the fact that inflation is slowing does not mean that prices are going down. Instead, it means that they are no longer going up. Seniors should get the most out of their retirement checks, even if next year’s checks are a little bigger. Overall, seniors will probably get an extra $48 a month, but this may not help many of them with their money problems.
Yes, general inflation is going down, which looks like a good thing, says Michael Ryan, founder of michaelryanmoney.com and an expert on money matters. But this is what I see wrong with people every day: Senior costs don’t go up or down in the same way.
This means that for many people, the prices of things like food, rent, and medical care are still higher than they were in the past. Ryan also said that people should never depend on Social Security as their only source of income in retirement. This is what it has become for far too many people, though.
Despite the annual COLA increase, retiree checks might be at risk
A new cost of living adjustment (COLA) is made every year by the Bureau of Labor Statistics. However, pensioner checks could be at risk because the Social Security trust funds could run out of money before 2033. More than 64 million people could lose some or all of their retirement income if this happens. This will hurt their long-term financial health and income in retirement.
If the changes to benefits happen, millions of people who receive them will need to know how much they will lose so that they can plan how to make up for it and keep their budgets in balance.
Benefit cuts depend on the retiree’s age, length of service, and total earnings over their career. In 2033, for example, a low-income couple with two incomes that retires would see their checks cut by $10,000. A marriage with two high-earners would get the $21,800 tax break.
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