Today, I have an important update for Social Security recipients, especially those relying on the Cost of Living Adjustment, or COLA, for next year. Unfortunately, I have to give you a bit of a warning, so don’t get your hopes up too high.
The truth is, the COLA for 2025 is going to be on the lower side. If you’ve been expecting a big increase to help you with rising costs, you might want to prepare yourself for disappointment.
Let me explain why.
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So, how is the COLA calculated?
Well, it’s pretty straightforward. The Social Security Administration only looks at inflation rates for the third quarter of the year—that’s July, August, and September.
In July, inflation was reported at 2.9%.
In August, it dropped to 2.5%.
We don’t have September’s data just yet, but the expectation is that it’ll drop even further. This means the COLA for 2025 is likely to land somewhere in the 2% range.
In fact, the Senior Citizens League is projecting a 2.5% increase.
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What does this mean in dollars?
Let’s break it down. If we go with that 2.5% increase, here’s what that looks like for the average retiree. According to Bankrate:
The average retiree can expect about an extra $48 each month next year.
That’s it. So, while it’s better than nothing, it’s not a huge bump. And I just want to be honest with you—don’t expect anything bigger.
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But here’s the thing…
Even though 2.5% is around average historically, it doesn’t mean it’s enough to keep up with your rising expenses. Especially over the past decade, Social Security COLA increases have often lagged behind inflation. And this decade has been even worse.
Why?
Well, the way the government calculates COLA is flawed. Right now, they use a method called CPI-W, which measures inflation for wage earners. But that doesn’t accurately reflect the cost of living for older Americans, especially with things like healthcare, which hit seniors much harder.
There’s a better method—CPI-E—that would focus more on older adults’ expenses, but Congress hasn’t switched to it yet. They’ve talked about it for years, but there’s been no real action.
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So, what’s the takeaway here?
It’s simple: Don’t expect a big increase next year.
The government’s calculations are outdated.
Inflation is already being reported lower for the months that matter.
And most importantly, Social Security benefits haven’t kept up with the actual rising costs of living.
It’s a frustrating situation. Every year of being short-changed adds up, and over time, it really snowballs.
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Now, I want to hear from you.
What do you think about all of this? How are you managing with these smaller COLA increases? Let me know in the comments below.
Personally, as a millennial, I’ve paid so much into Social Security, but I have low expectations about what I’ll actually get back in the future. But that’s just me—what do you think?
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Hi, I’m deoravijendra, a professional content writer and digital marketer with 5 years of SEO experience. I’m passionate about crafting compelling content and optimizing online presence for maximum impact.