On October 10, the Social Security Administration (SSA) made the announcement on the cost-of-living adjustment (COLA) for the year 2025. Many people were concerned about the impact that a smaller than projected adjustment would have on their checks as well as their quality of life.
The adjustment of 2.5% came as a surprise to many people, including experts and beneficiaries alike. They had anticipated that inflation would not have slowed down as much as it did, but they believed that it would happen before the end of the year in order for the increase to compensate for the economic volatility that occurred in 2024.
Regardless of the circumstances, the raise has been declared, and it is now time to examine the budget in order to determine how much of the additional money will be used to cover the expenses that are required.
How far will your Social Security check go with the new COLA?
It would be hard to tell how the rise would effect each individual due to the fact that no two persons have the same journey and receive the exact same Social Security check.
However, it is beneficial to be aware that the increase will be the same proportion for all checks, regardless of the type of benefit that is received. It goes without saying that this includes retirement benefits.
Naturally, the Social Security Administration provides some statistics that might assist individuals in estimating the extent to which the rise will have an effect on their financial situation.
However, if you are interested in determining the amount by which your specific benefit will increase as a result of the new cost-of-living adjustment, all you need to do is multiply your current benefit by the increase of 2.5%.
It is estimated that retired workers will get an average of around $1,920 per month from Social Security in the year 2024.
This figure is subject to modest variations due to the fact that new retirees will contribute their amount to the total or that deceased individuals will start receiving their benefits.
Although it does not make much of a difference, there is a variance of a few dollars that can be seen every month. This indicates that if we apply the cost-of-living adjustment, we will receive an increase of $48.
If you are above this average, you will receive a larger raise; nevertheless, the unfortunate news for individuals who do not receive this amount is that their gain will also be significantly lesser than the average.
What if the COLA isn’t enough?
Especially after hearing the news that Medicare would be increasing their Part B premiums by around ten dollars per month beginning in the new year, a great many of retirees and other beneficiaries are thinking the same thing.
As a result, the average person would only receive a real rise of $38 rather than the $48 that they would have seen previously.
In addition, the fact that inflation has slowed down does not necessarily suggest that prices have decreased; rather, it simply indicates that prices will hopefully slow down their rapid increase.
It has been difficult for many people who are on a fixed income to cover their bills, and in many instances, they have been forced to delve into their already small savings.
However, the solution that has shown to be the most comprehensive would be to modify the way that the cost-of-living adjustment (COLA) is calculated, from the CPI-W to the CPI-E.
While the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is slanted toward the life of urban young professionals, the Consumer Price Index for the Elderly (CPI-E) is a weighted average of price increases for the same data but is geared toward the needs of individuals who are 62 years old or older.
It is impossible for this to be the solution given that the index is not going to undergo any changes in the near future.
So, what additional options are available to retirees in order to improve their financial situation? It is possible to withdraw money from personal savings or retirement accounts; however, this is not a particularly good alternative.
There is a proverb that says you cannot take it with you, but it is essential to have a cushion, and many recipients are already struggling to make ends meet economically.
Going back to work is an option that is less preferred; however, a part-time job that not only has the potential to improve one’s financial situation but also provides medical coverage, human contact, and a variety of other benefits could be a good option for individuals who are in excellent health and prepared to take on the challenge.
When will the increase be added to the checks?
The first check that will have the raise added to it is the Supplemental Security Income check, which will be distributed on the 31st of December due to the fact that January 1st is a national holiday.
As planned, the remaining monies will be distributed as follows:
- The third of January If you were receiving Social Security benefits before to May 1997 or if you were receiving both Social Security and SSI, your Social Security benefits will be paid on the third of the month, while your SSI benefits will be paid on the first of the month.
- Those who were born between the first and tenth of each month are eligible to receive payments on January 8th.
- Those who were born between the 11th and the 20th of each month are eligible to receive payouts on January 15th.
- On the 22nd of January, payments are made to those who were born between the 21st and the 31st of each month.