In less than two weeks, Social Security recipients will receive their new cost-of-living adjustment (COLA) check rise; nevertheless, the widespread question is whether this increase will be sufficient to pay their living expenditures. Social Security is one of the federal government’s most significant and costly duties. 50 million of the 68 million Americans who receive benefits from the Social Security Administration (SSA) are retired workers, who collect about $1.5 trillion each year. Approximately 13% of recipients rely almost entirely on SSA payments, and more than 40% of these retirees rely on them for at least 50% of their income.
Social Security recipients will know the official COLA rise in October
You may be concerned about how inflation will affect your Social Security benefits, regardless of how crucial they are to your retirement. Will you have to tighten your belt as expenditures increase? Fortunately, the Social Security Administration (SSA) modifies benefits regularly to reflect increasing expenses and guarantee that seniors may continue to live comfortably. For many retirees, this is referred to as the yearly cost-of-living adjustment (COLA), and it is significant. In the early days of Social Security, any modifications to benefits had to be approved by Congress. This meant extended periods without change and continual political fights. Today’s retirees are lucky that automatic adjustments were implemented in 1975.
Since then, practically everyone has received a minor rise in benefits each year. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a specific inflation indicator, is connected to this COLA. Every month, the Bureau of Labor Statistics (BLS) calculates and reports the CPI-W data. The BLS uses a variety of data points to measure inflation across the economy and simplify it to a single figure. Although it has been used continuously for more than 50 years, there is considerable controversy regarding whether it is the best marker and how correctly it represents seniors’ higher spending.
Americans are still suffering from coronavirus inflation
Even though it has diminished in the previous year, the worst of the coronavirus pandemic’s inflation continues to strike a substantial number of Americans. In 2021 and 2022, it reached levels not seen in decades. Because of this condition, the Social Security adjustments for 2021 and 2022 showed COLAs of 5.9% and 8.7%, respectively. These were the largest since the early 1980s. These appear to be positive adjustments, but the CPI-W may not be the most appropriate measure to utilize. It is intended to monitor the behavior of young adults who are still working.
However, retirees have distinct demands and spending preferences, and one of the most significant changes could be in the quality of medical treatment. This is a considerably greater portion of a retiree’s budget and a sector of the economy that frequently faces higher-than-average inflation. It is crucial to note, however, that CPI-W does not account for such differences. As a result, seniors’ purchasing power may be diminishing despite the annual COLA. The Senior Citizens League’s (TSCL) most recent investigation found that since 2010, seniors’ purchasing power from Social Security income has declined by 20%.
If TSCL is correct, whatever COLA is on the way will most likely be insufficient to compensate for the loss of purchasing power. But any gain is preferable to none. So, when will we know the 2025 adjustment? The official number will not be accessible until October when the annual COLA is issued. However, the CPI-W data for July, August, and September will be utilized to compute it. Since two of those statistics have already been disclosed, we can reasonably predict the remaining figure. TSCL’s newest prediction is 2.5%, down from 3.2% last year. Although the official statistic will not be released for much longer than this estimate, it will be available soon enough.