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COLA 2025 Increase Amount Announced by Social Security Administration [1]
['Aliss Higham', 'David Faris', 'Evan Barker']
Date: 2024-10-10 08:38:21-04:00
The Social Security Administration has announced a 2.5 percent boost to benefits for 2025—in line with forecasters' predictions.
The Cost of Living Adjustment, more commonly known as COLA, increases benefits administered by the SSA on a yearly basis. The COLA is designed to keep Social Security retirement, survivor and disability payments in line with inflation, so that purchasing power is not eroded over time.
The first adjusted payments will be made in January 2025 for retirement benefits, and for those who collect Supplemental Security Income (SSI), benefits will be increased in December this year.
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Each year, the COLA is based on the average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) in the third quarter of the current year and the average in the same period of the previous year. If any increase occurs, that percentage is rounded to the nearest 10th of 1 percent, and becomes the annual COLA.
#BreakingNews" target="_blank">
https://twitter.com/hashtag/BreakingNews?src=hash&ref_src=twsrc%5Etfw">#BreakingNews - The 2025 COLA is 2.5%. More to come shortly... — SocialSecurity_Press (@SSAPress) October" target="_blank">
https://twitter.com/SSAPress/status/1844355191685980657?ref_src=twsrc%5Etfw">October 10, 2024
The 2.5 percent increase will mean a benefit recipient receiving $1,870 per month from SSA could see their monthly payment rise about $46.80 next year, according to Independent Social Security and Medicare policy analyst Mary Johnson.
"The 2025 COLA will be the lowest received by Social Security beneficiaries since 2021, at the same time inflated prices persist on key essentials such as housing, meats, auto insurance, any type of service and repairs," Johnson said in a statement to Newsweek.
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"Despite it being the lowest COLA since 2021, a 2.5 percent COLA would be considered about average."
A 2.5 percent increase for 2025's COLA was predicted by many forecasters, including Johnson, the Senior Citizens League and Krisstin Petersmarck, the founder and CEO of New Horizon Retirement Solution, among others.
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Context
The 2025 COLA was expected to be less than previous years, owing to inflation reducing throughout 2024 so far. Inflation has tracked downward from 3.7 percent in September last year to 2.3 percent this September this year.
The COLA for 2023 was the largest ever, with seniors getting an 8.7 percent annual raise following a period of high inflation, which reached a high of 9.2 percent in 2022.
The COLA 2024 boosted benefits 3.2 percent.
Views
Social Security advocates and experts have stressed the importance of the new COLA, though some have warned it will hardly go far enough.
"The COLA is a vital component of Social Security, ensuring older Americans have an inflation protected source of income in retirement," AARP's CEO Jo Ann Jenkins said in a statement to Newsweek.
"This adjustment means older Americans will receive needed relief to help better afford essential items from groceries to gas. Inflation took a financial toll this past year, particularly on retirees, who often rely on Social Security as a key source of income. Even with this adjustment, we know many older Americans who rely on Social Security may find it hard to pay their bills. Social Security is the primary source of income for 40 percent of older Americans.
"While this adjustment is important, there is more we must do to ensure older Americans can continue to count on Social Security. AARP continues to call on Congress to take bipartisan action to strengthen Social Security and secure a long-term solution that Americans can rely on," Jenkins continued.
However, Johnson said the rise is not enough to help seniors with their day-to-day costs. "With average retiree benefits rising by about $48 per month, that's only going to buy about 14 gallons of gasoline per month at today's prices, or maybe enough groceries for one to last two or three days," she said.
"This year represents another lost opportunity to grant seniors the financial relief they deserve by changing the COLA calculation from the CPI-W to the CPI-E, which would better reflect seniors' changing expenses," Shannon Benton, executive director of The Senior Citizens League (TSCL), said. The CPI-E monitors the spending of Americans 62 years of age and older.
"Seniors—and TSCL—demand that Congress takes immediate action to strengthen COLAs to ensure Americans can retire with dignity, such as instituting a minimum COLA of 3 percent and changing the COLA calculation from the CPI-W to the CPI-E. Our research shows that 67 percent of seniors depend on Social Security for more than half their income and that 62 percent worry their retirement income won't even cover essentials like groceries and medical bills."
"The automatic annual cost-of-living adjustment is one of Social Security's most essential and unique features. It is intended to ensure that benefits do not erode over time," Nancy Altman, president of Social Security Works, said in a statement sent to Newsweek.
She agreed with a change to COLA formulation so it better reflects the expenditure of older Americans, particularly in regard to higher medical expenses later in life.
"However, the formula currently used to calculate annual COLAs under-measures the expenses that Social Security beneficiaries face. Seniors spend a greater proportion of their income on medical expenses―and the Social Security COLA should reflect that," she said.
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[1] Url:
https://www.newsweek.com/cola-2025-increase-amount-ssa-social-security-administration-1966905
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