The Social Security Administration (SSA) is set to announce the 2025 cost-of-living adjustment (COLA) for Social Security and Supplemental Security Income (SSI) benefits, the Washington Post reports.
While the annual COLA is intended to help benefits match inflation, many seniors find that these adjustments aren’t keeping up with their rising expenses, particularly for health care.
This year’s COLA is expected to increase by only 2.5%, a drop from the previous three years, when inflation was higher due to the pandemic. In 2022, the adjustment was 5.9%, and it rose to 8.7% in 2023 before falling to 3.2% this year. A modest increase would provide just a $48 monthly boost to the average retired worker’s benefit of $1,920.
Social Security remains the primary source of income for many retirees. A Gallup survey reveals that 58% of retirees rely on these benefits as their “bedrock” of financial security. However, Social Security was never designed to be the sole income source for retirees, though for 28% of recipients, it is their only source of financial support, according to Census Bureau data.
A key issue is that the COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which does not fully reflect retirees’ expenses—particularly rising health-care costs. Advocacy groups like the Senior Citizens League have argued for the COLA to be tied to a different index, the Consumer Price Index for the Elderly (CPI-E), which accounts for how seniors typically spend their money.
Shannon Benton, executive director of the Senior Citizens League, emphasizes that the current system doesn’t address the spending realities of older Americans.
“The COLAs just aren’t keeping up with inflation,” Benton said.
She noted that the average Social Security benefit has lost about 20% of its purchasing power since 2010.
As discussions continue on how to best protect seniors’ financial security, Benton encourages retirees to advocate for changes to how COLAs are calculated, urging them to contact their members of Congress. While there is no immediate risk of Social Security running out of money, reforms are needed to prevent a funding shortfall projected for 2033.
For those struggling with Social Security payments as their primary income, seeking additional financial advice and considering personal savings plans may help bridge the gap.
