The Senior Citizens League has been consistently revising its projections for Social Security’s 2025 cost-of-living adjustment (COLA) upward. Social Security benefits received a significant 8.7% COLA last year and a 3.2% COLA this year, both exceeding the 10-year average of 2.3%. However, despite these increases, many Social Security recipients are still grappling with financial strains in the current economic climate.
According to the 2024 Retirement Confidence Survey (RCS) conducted by the Employee Benefit Research Institute, a substantial portion of retired workers anticipates having to make significant spending cuts to cope with inflation. Additionally, a considerable percentage doubts whether they have enough financial resources to sustain a comfortable retirement.
Unfortunately, it appears that the 2025 COLA is poised to be the smallest raise for beneficiaries in four years, as reported by The Senior Citizens League (TSCL), a non-profit advocacy group. Although the Social Security Administration is yet to announce an official figure, TSCL has been consistently increasing its COLA forecast for three consecutive months.
The anticipated 2025 COLA for Social Security benefits stands at 2.6%, as projected by The Senior Citizens League (TSCL). While this would mark the smallest increase in four years, it would still surpass the 10-year average of 2.3%. The calculation for the COLA is based on third-quarter inflation data, specifically the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from July through September of the current year compared to the previous year.
Despite ongoing revisions to the forecast, the Social Security Administration will only determine the official 2025 COLA once third-quarter CPI-W data becomes available on October 10, 2024. TSCL has consistently adjusted its forecast upwards this year due to inflation exceeding expectations.
It’s important to note that while CPI-W inflation has consistently surpassed expectations, the spending patterns of retirees may not be accurately reflected in this metric. Retirees typically allocate more of their budget to housing expenses, which have been particularly affected by inflation. As a result, CPI-W inflation may underestimate the financial strain experienced by retired workers and Social Security beneficiaries.
Given the current economic climate, where prices are rising faster than benefits, it’s advisable for retirees and beneficiaries to minimize unnecessary spending. Additionally, exploring opportunities to increase income, such as high-yield savings accounts, could provide financial relief in these challenging times.
