Cost of living adjustment update: What retirees can expect

The 2025 Social Security cost-of-living adjustment is expected to be lower than in previous years, raising concerns about its ability to keep up with persistent inflation. Retirement Daily' s Bob Powell joined TheStreet to discuss what retirees can expect.

Related: What interest rate cuts could mean for retirees

Full Video Transcript Below:

CONWAY GITTENS: And we're coming to that time of the year when we expect a cost of living adjustment to be announced. What are you expecting and how does that cost of living adjustment affect retirees?

BOB POWELL: Yeah, so it's really interesting. So the next CPI report comes out in October, and then shortly thereafter, social security will announce what the cost of living adjustment will be. It will it will likely be low, I'm guessing maybe around maybe 3% or so, give or take. And the idea behind the cost of living adjustment is that whatever your social security benefit was the previous year, it will be adjusted upwards by that 3% And, you know, folks will say that 3% is enough isn't enough to offset the cost of living. I'll still be behind the eight ball even though there's a 3% cost of living adjustment. And I would say, by and large, that that might be true because you're spending maybe more on on food and groceries than you did in previous years.

Retire with TheStreet:

• Average Americans top 401(k), retirement savings options explained
• These small changes can maximize your retirement, 401(k) success
• Debunking retirement and 401(k) myths to maximize your savings now
• Maximize your retirement, 401(k) savings even if you feel behind

The other thing is, for many, many years, social security beneficiaries have benefited from the zero interest rate policy world in which, yes, cola adjustments were low, but CPI was low as well. And so when you think about what's the effect of inflation on older adults for all these years, with the exception of maybe covid and a couple two years ago, you know, it's been relatively low. So even though the adjustments have been low, the inflation rate has been low. And so hopefully that hasn't hurt older adults as much. I have to admit, there is something where there's a CPI index that looks at the cost of living for older people, those in their 60s and 65 and older, and that shows that it's roughly equal to CPI. So it to me, it's it's one of those double edged swords. I always think of it this way. On the one hand, when you have high inflation, you have high interest rates typically, and that benefits the people who are investing in CDS and money market funds. On the other hand, when inflation is high, it also hurts people because their expenses may not be their income may not be rising as fast as their expenses. Double edged sword.