Social Security benefits over 72.5 million Americans every year, these include a majority of retired workers, disabled workers, and survivors. The retirees are the ones who have been patiently waiting for the 2025 COLA.
For months there have been speculations about COLA, but at last on October 10, the Social Security Administration announced that benefits would be rising by 2.5% in the new year. Compared to recent projections, it is a beneficial rise. However, if we look back at the previous year’s COLA, in 2024, Social Security benefits rose by 3.2% at the start of the year. In 2023, they rose 8.7%. It is evident why the 2.5% increment looks so insignificant in comparison, at least at first glance.
Social Security’s cost-of-living adjustments are designed to protect the buying power of benefits by ensuring payments increase at the same pace as inflation. This indicates that inflation is also going to be significantly lower in 2025 as compared to the previous year.
Unfortunately, there are some other concerns. According to speculations, the Senior Citizens League, a nonpartisan advocacy group, estimates benefits have lost 20% of their purchasing power since 2010 because COLAs have failed to keep up with inflation. Even if inflation is going to put its foot down still the pattern will set to continue for next year.
“We got a good message mixed in with the bad. The reason the COLA is so low is because inflation is under control,” noted Kelly LaVigne, vice president of consumer insights at Allianz Life. “Here’s the hard part: Great, inflation is under control, but seniors don’t really feel like they got caught up.”
On the bright side, even if COLA is low, inflation will also maintain and continue to get lower. This might bring change in the purchasing power of retirees in the future.
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