Big Social Security Changes Are Coming in 2025 — But Don’t Expect Life to Get Easier for Retirees
Although the 2025 Social Security Cost of Living Adjustment (COLA) was eagerly anticipated, many beneficiaries are left wondering how they can manage with such a meager boost when the 2.5% rise was revealed in October.
Many beneficiaries are concerned that the 2.5% increase will experience the same fate as the 2024 increase, which was swiftly overtaken by inflation in the first half of the year. Previous increases following the pandemic were significant, and while they were caused by high rates of inflation, they did assist those in need in affording their lifestyle.
Because they are among the most vulnerable and have the greatest needs, beneficiaries who receive Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) are among the most concerned. The fact that Medicare Part B premiums have increased by about $10 for 2025 adds to their worries about their ability to make ends meet. Although it may not seem like much, the increased Medicare premium will be a significant expense given that the average benefit increase is less than $50. leaving little money to pay for all other rising costs.
How the COLA actually affects Social Security benefits
This worry is supported by the data. Prior to the October COLA announcement, a study by the law firm Atticus revealed that three out of five disability beneficiaries were “concerned about their future financial stability” after learning about the anticipated increase, which turned out to be true. Nearly 60% of people receiving disability benefits are thinking about getting another source of income to help offset the impact, but doing so could interfere with their benefits and lower their quality of life, so there must be a balance.
More than half of respondents, or roughly 58%, believe that COLA changes should better represent the cost of living, according to the poll. Although the use of a better index has been discussed, Congress has not taken any action to implement the adjustment. In order to maintain financial stability, 49% of participants believed that the SSA should offer “extra financial support for essential costs, like healthcare and housing,” and 45% were in favor of a minimum guaranteed benefits level. policies that are unlikely to pass.
“There is no question that SSI benefits need to be higher,” said Darcy Milburn, director of Social Security and health care policy at The Arc of the United States. Additionally, Congress must revise antiquated regulations that keep SSI recipients in poverty, penalize them for getting married, hinder their ability to work, and limit their financial independence.
Though it “may seem like a bad thing at first,” some experts, like Cliff Ambrose, founder and investment manager at Apex investment, retain the optimistic outlook of a low COLA by saying that the decreasing inflation it is linked to is a good thing. “A larger COLA is required to help retirees keep up with rising costs because everyday items like groceries, utilities, and healthcare become more expensive when inflation is high.” On the other hand, retirees don’t require as big of an adjustment to preserve their purchasing power when inflation slows down and prices stabilize. Because prices aren’t increasing as quickly, retirees’ money should go farther even though a lower COLA may result in a lesser rise in Social Security benefits.
“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,” said Shannon Benton, executive director of TSCL, who speaks to the issues on a daily basis.
For some, the situation has gotten so bad that, according to a Motley Fool poll of 2,000 American retirees on October 11, the day after the revelation, half of them are thinking about leaving retirement to earn more money.