2025 Social Security Benefits Increase: What You Need to Know
Exciting news for Social Security beneficiaries! The average payment is set to increase by $48 per month in 2025. The Social Security Administration recently announced a 2.5% cost-of-living adjustment (COLA) for next year, marking the smallest increase since 2021. This adjustment comes as a welcome relief for the close to 68 million Social Security beneficiaries and almost 7.5 million Supplemental Security Income recipients. Those receiving benefits will see a 2.5% increase in their checks starting January 1, 2025, and December 31, 2024, respectively.
This increase is based on inflation numbers from July to September. Inflation rates for these months were relatively low compared to previous years, with September’s inflation rate reported at 2.4%. As a result, the Federal Reserve made the decision to cut the federal funds rate for the first time in four years in September, impacting various interest rates across the board, from mortgages to credit cards. This adjustment aims to keep up with rising costs and ensure the financial stability of recipients.
How is the COLA calculated?
The COLA is determined based on the average inflation among urban wage earners and clerical workers from July to September. The difference between this year’s average inflation and the previous year’s figures is calculated to arrive at the final percentage increase.
Advocating for Change
There is ongoing debate about the current method of calculating the COLA. Some groups, like the Senior Citizens League, propose using the CPI-E, which measures inflation for Americans ages 62 and older, instead of the current method using the CPI-W. Advocates argue that this change would better reflect seniors’ changing expenses and provide more accurate adjustments to benefits.
Is the COLA Enough?
While the increase in benefits is undoubtedly helpful, concerns remain about whether it will be sufficient for many older Americans. AARP CEO Jo Ann Jenkins expressed that even with this adjustment, many individuals relying on Social Security may struggle to cover their expenses. Social Security remains the primary source of income for 40% of older Americans, highlighting the importance of ongoing discussions and potential future changes to ensure financial security for all recipients.