Beneficiaries of Social Security always look forward to the annual increase in their payments because it is a significant milestone.
Given that the majority of people are living on a fixed income (which does not mean that it does not increase; rather, it means that it increases from a base amount that never changes, in contrast to salaries, which can grow exponentially), any increase is considered to be good news.
This is especially true in years such as this one, when people are still struggling to cope with high inflation and the aftereffects of the pandemic.
As a result of the fact that inflation in 2024 exceeded the Cost of Living Adjustment (COLA) inside the first part of the year, it is not surprising that a great number of retirees were skeptical about the adjustment that was going to take place in 2025.
On October 10, it was revealed that it would be 2%, and that amount is now set in stone. Those who expected that it would be low were, regrettably, correct in their prediction.
A lower cost-of-living adjustment (COLA) indicates lower inflation data, and a higher COLA would allow for some breathing room as long as the new year does not spike it again.
However, what everyone can see is that depending on the amount of benefits that pensioners were already receiving, this increase will either go further or leave them in the same position. Experts disagree on whether or not this is a positive thing.
According to information provided by the Social Security Administration, the typical couple who receives Social Security benefits in the year 2024 will receive $3,014 per month, which will add up to more than $36,000 yearly to their total income.
Despite the fact that this is not a bad number, it is not sufficient to meet the expenses of the majority of people.
However, it is important to note that Social Security benefits were only intended to cover approximately forty percent of expenses during retirement, with the remaining expenses being paid by a pension or a retirement account.
The Social Security COLA increase
When the rise of 2.5% is taken into consideration, the average retired couple that receives the average monthly Social Security benefit of $3,014 in 2024 will see an increase of $75 in 2025, which will bring the total amount that they get in their checks to $3,089.
Although it would equate to an additional $900 each year, it is possible that it would not be sufficient to meet the additional costs.
For the purpose of estimating your new benefit, multiply the amount you will receive in 2024 by 2.5%. This is because the cost-of-living adjustment (COLA) is a percentage of your current benefit.
The formal cost-of-living adjustment notices will arrive in December, either through the mail or in your Social Security account online, in case you want to be absolutely certain of your calculations.
The increase that comes into effect in January 2025 will be reflected on your check. The specific date of your payment is determined by the day of the month in which you were born:
- On January 8, 2025, born between the first and tenth of the month
- On January 15, 2025, born between the 11th and the 20th of the month
- On January 22, 2025, born between the 21st and the 31st of the month
What if the COLA isn’t enough?
As a matter of fact, this raise will not be sufficient to pay all of the additional costs that 2024 has brought for many families, and it has not been for a considerable amount of time.
The Senior Citizens League (TSCL) reports that benefits have really lost almost twenty percent of their purchasing power since the year 2010, and it is not predicted that they will regain their previous level of purchasing power any time soon.
This is due to the fact that cost-of-living adjustments (COLAs) are computed for older citizens using an inaccurate CPI, but legislative initiatives to rectify the situation have not been accepted.
As opposed to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is weighted toward people aged 62 and older, the CPI-E, which places greater attention on healthcare and other concerns pertaining to senior citizens, they utilize the CPI-W.
There are a few things that retirees can do to boost their income or their savings while they are in retirement. Some of the options that retirees have are as follows:
- Spending less money whenever it is feasible
- Utilizing either a part-time or full-time job to augment your income
- If you are still employed, delaying retirement is an option.
- Investigating the opportunities for government aid