Social Security recipients may face a lower cost-of-living adjustment in 2025, potentially straining retirees’ budgets.
At a Glance
- Social Security benefits are projected to increase by 2.5% in 2025
- This translates to an average monthly increase of $48 for retirees
- The 2025 COLA is lower than the 3.2% received in 2024
- Two-thirds of seniors rely on Social Security for over half their monthly income
- The Social Security Administration will officially announce the 2025 COLA in October 2024
Expected 2025 COLA: A Modest Increase
The Social Security Administration is set to announce a cost-of-living adjustment (COLA) of approximately 2.5% for 2025, scheduled for October 10, 2024. This adjustment, while helping to maintain the purchasing power of beneficiaries, represents a decrease from previous years. For the average monthly benefit of $1,920, this 2.5% increase would result in an additional $48, bringing the total to $1,968.
This projected increase is based on inflation data from the third quarter (July through September) using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The 2025 COLA falls below the 3.2% increase received in 2024 but remains close to the historical average of 2.6% over the past two decades.
Will 2025 Social Security COLA increases be enough for retirees? https://t.co/6t3L7XlVY1
— TheStreet (@TheStreet) September 27, 2024
Impact on Retirees
The modest 2.5% increase may pose challenges for many retirees who rely heavily on Social Security benefits. According to the Senior Citizens League (TSCL), approximately two-thirds of seniors depend on Social Security for more than half of their monthly income, with 28% relying on it entirely.
“Approximately two-thirds of seniors rely on Social Security for more than half of their monthly income, and 28% depend on it entirely,” – Shannon Benton, TSCL’s executive director, said in a statement.
The TSCL advocates for a minimum COLA of 3% to ensure seniors can afford basic needs. With the projected 2.5% increase falling short of this recommendation, some retirees may need to explore additional income sources or adjust their budgets to accommodate rising living costs.
Broader Implications and Future Concerns
Beyond the immediate impact of the 2025 COLA, Social Security faces potential long-term financial challenges. Experts warn of possible steep benefits cuts by 2033 if the program’s trust fund becomes insolvent. This could result in a typical couple seeing their Social Security benefits reduced by more than $16,000 by 2033, according to the Committee for a Responsible Federal Budget.
“Ensuring that seniors have enough to feed and house themselves with dignity is a major reason why we advocate for a minimum COLA of 3%” – Shannon Benton, TSCL’s executive director, said in a statement.
The Social Security Administration is working to improve accessibility to benefits. By late 2025, the SSA plans to implement a fully digital system called “iSSI” for Supplemental Security Income (SSI) applications, making it easier for eligible Americans to apply for these additional benefits. This development could provide some relief for those struggling with the modest COLA increase.
Planning for the Future
Given the projected modest increase and potential future challenges, retirees and those nearing retirement age should consider proactive budget planning. This may include exploring supplementary income options such as personal savings, part-time employment, or other federal benefits to ensure financial stability in the face of rising living costs.
As the official announcement of the 2025 COLA approaches, beneficiaries should stay informed about any updates or changes that may affect their Social Security benefits. The Social Security Administration will notify beneficiaries of the increase via email or text messages, providing crucial information for financial planning in the coming year.
