Social Security and SSI benefits are expected to rise again next year, according to a new estimate, but probably not as much as last time. (Disability Scoop)
Inflation remains active, but Social Security’s projected cost-of-living adjustment (COLA) rate is still lower than its 2024 counterpart.
The Senior Citizens League (TSCL), one of the largest nonpartisan seniors groups in the country, has released a new COLA estimate for 2025, downgrading from its May prediction.
TSCL’s June estimate was for a 2.57% increase according to a written statement, while its May iteration was around 2.66%. This is even lower than the average COLA increase: 2.6%.
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The TSCL also commented in a statement that “only one of the five COLAs implemented so far in the 2020s (20%) has outpaced inflation, compared to 40% in the 2010s and 60% in the decades 2000 and 1990”.
In 2024, the COLA for Social Security beneficiaries was 3.2%.
For those who may not know, due to the Social Security amendments passed in 1972, COLA increases the amount Social Security beneficiaries receive each year and is based on the Consumer Price Index for Urban Wage Earners and Office Workers ( CPI-W), a federal measure that estimates the cost of a basket of goods for the average wage earner.
Despite the decrease from the May projection, the June estimate is still slightly higher than the Congressional Budget Office’s (CBO) annual prediction, which was published in a February data set. They forecast a 2.5% increase by 2025, but keep in mind that the CBO and TSCL use different methodologies, and there are a few months left before the final COLA increase for 2025 is calculated.
About cost of living adjustments
Social Security benefits and Supplemental Security Income (SSI) payments are subject to an annual COLA based on inflation rates to ensure monthly payments keep pace with rising costs.
In October 2023, the Social Security Administration (SSA) announced that beneficiaries will see a 3.2% increase by 2024, increasing the average monthly Social Security benefit payment by more than $50 and the maximum SSI payment by $30.
Cost of living adjustments are determined using data from the third quarter (July, August and September) of the Consumer Price Index for Urban Wage Earners and Office Workers (CPI-W).
Inflation for those three months is added, averaged, and then compared to the average for the third quarter of the previous year, and the percentage difference between the current year and the previous year serves as the COLA rate for the following year.
In recent years, the impact of the COVID-19 pandemic on inflation caused abnormally high adjustments, including a 5.9% increase in 2022 and an 8.7% increase in 2023, which was the largest increase in four decades.
Inflation reductions in 2023 brought the 2024 adjustment back down to 3.2%, which is more in line with the average annual increase of 2.6% seen over the past two decades.
In 2023, an average of nearly 67 million Americans per month collected Social Security benefits, totaling more than $1.4 trillion in benefits paid during the year, according to the SSA.
Social Security benefits account for about 30% of the income of Americans age 65 and older, the administration said.
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