Social Security Update: Will The Next COLA Be The Lowest Since 2021

Photo courtesy of Newsweek/Social SecurityPhoto byNewsweek

Each year, the Social Security Administration adjusts its benefits to account for inflation, providing an annual cost-of-living increase that's meant to offset rising prices. This year, the program's 67 million recipients may see their smallest boost since 2021.

The 2025 COLA adjustment had been projected to come in around 2.63% per the Senior Citizens League, an advocacy group for older Americans, said last Thursday. That figure is based on a recent inflation report, with consumer prices in June rising 3%, the smallest increase since June 2023, and less than the 3.1% economists were forecasting.

If enacted, a 2.63% increase would represent a monthly payment increase of only $50, based on the current average monthly Social Security benefit of $1,907. To be sure, the official percentage increase on this year's COLA, won't come until October, when the Social Security Administration announces the next year's benefit hike for beneficiaries. Usually, the first payment with the new COLA will show up in most recipients' January benefit checks.

“While U.S. inflation is decreasing, poverty among senior citizens has been on the rise in recent years, and almost half of people above 65 years old said they were having difficulty in paying their household bills”. According, to the most recent Census Household report. This report surveyed social security recipients from May 28 to June 24.

What are Senior Citizens concerned about:

High food prices are creating food insecurity for many retirees. Per Feeding America, estimated that 5.5 million Americans age 60 and above suffered from food insecurity in 2021, in the most recent study available stated that number is likely higher today."

How Social Security sets its COLA:

The Social Security Administration sets its annual COLA based on inflation during the third quarter, or from July through September. The agency takes the average inflation rate over that period from what's known as the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, which tracks spending by working Americans.

If that inflation rate is higher than the same period a year earlier, the COLA is adjusted upwards by the difference. Some advocacy groups and lawmakers have questioned the use of the CPI-W since older Americans spend differently than younger workers. For example, the Senior Citizens League has noted that the CPI-W assumes workers spend about 7% of their income on health care depending on their monthly income. Realistically, senior citizens can spend up to 16% or more on healthcare costs.

Share Your Thoughts:

Do you think the Social Security Administration should not CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers ) spending to calculate COLA adjustment?

Do you think the cost of food at the grocery stores has decreased or remain the same?