Uncommon Knowledge
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A new cost of living adjustment (COLA) prediction for Social Security has many seniors scratching their heads at how they’ll stretch their benefits amid inflation.
The Senior Citizens League (TSCL) just predicted the COLA for 2025, saying beneficiaries can expect a 2.66 percent bump in benefits. Earlier in the year, the estimate was set at 2.6 and 2.4 percent.
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If a 2.66 percent boost is implemented, it would likely increase monthly payments by around $50 for most recipients.
While the jump in monthly benefits would be better than the earlier predictions, many seniors were expecting a higher boost to deal with the impacts of inflation.
The Social Security Administration adjusts Social Security payment amounts every year based on the consumer price index, but not everyone feels the change would be enough to get by.
“While COLA payments will increase to offset the effects of inflation, the problem many have with the potential percentage jump is it won’t get far enough to meet most of the financial needs of seniors,” Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, told Newsweek. “Obviously daily expenses for this age group continue to rise, but the uptick in healthcare costs are putting an additional strain on them, and COLA payments may not be enough to match that uptick.”
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Seniors will also likely be dealing with higher Medicare Part premiums, according to TSCL.
In the Medicare Trustee report from this month, Part B premiums were predicted to grow by $10.30 a month to a total of $185. That increase is on top of nationwide inflation on groceries, housing and transportation.
“For 2024, the average Social Security benefit rose by $50 and after subtracting $9.80 to cover Medicare Part B Premium increases, the total change in benefits came out to just $40.20 a month. With the forecast of a 2.66 percent COLA for 2025, it appears seniors will continue to suffer financial insecurity as much next year as they have this year,” Shannon Benton, executive director of TSCL, said in a statement.
The COLA for each year depends on the rise of the consumer price index for urban wage earners and clerical workers (CPI-W) for the third quarter of the last year. That means the official COLA for 2025 won’t be calculated until later in the year.
Many finance experts have questioned whether the CPI-W even stands as a good measure of what seniors can expect inflation wise, with many saying the consumer price index for the elderly (CPI-E)
In 2024, Social Security checks rose by 3.2 percent due to the COLA after a more generous increase of 8.7 percent last year. Many seniors, roughly 71 percent, reported in TSCL 2024 Senior Survey that the increase in household costs they saw went beyond the 3.2 percent jump from the COLA.
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“The majority of seniors still feel like their costs are rising faster than those annual adjustments,” Michael Ryan, a finance expert and founder/CEO of michaelryanmoney.com, told Newsweek. “So while the COLA certainly helps, it often still doesn’t fully cover the real inflation draining seniors’ buying power.”
Due to the insufficient funds from Social Security for seniors, many will need additional income streams, including a 401(k), IRA or other investment accounts.
“At the end of the day, any COLA increase is better than none to prevent total Social Security stagnation,” Ryan said. “But the 2.6 percent projection for 2025 underscores the need for policymakers to reexamine whether metrics like CPI-E would better serve seniors by more accurately reflecting their unique spending habits. We just want to make sure government benefits retain as much purchasing power over time as possible on those fixed incomes.”
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.