Announced cuts in Social Security benefits (if nothing changes) – Update on retiree situation
According to Lagradaonline, With less than a month until the official announcement, Social Security beneficiaries are preparing for a cost-of-living adjustment (COLA) that may fall short of expectations. This development is particularly concerning for those who rely on Social Security benefits as a primary income source, given its crucial role in covering living expenses.
The Importance of the COLA Announcement
Gallup’s long-term surveys have consistently shown that over 80% of retirees rely on Social Security for at least part of their income. In 2024, this figure rose to 88%, highlighting the program’s significance for many seniors. The COLA announcement, set for October 10 at 8:30 a.m. Eastern time, is a key event for beneficiaries as it directly impacts their financial well-being.
How Social Security Checks Are Adjusted
The Social Security Administration (SSA) adjusts benefits annually using the COLA mechanism to reflect changes in the cost of living. This adjustment aims to ensure that Social Security payments keep pace with inflation, allowing recipients to maintain their purchasing power. Before 1975, benefit adjustments were made through special Congressional sessions, but since then, the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) has been used to determine the annual COLA.
The CPI-W tracks a range of goods and services, providing a clear figure each month based on their weighted importance. The COLA is calculated using the average CPI-W readings for July to September of the current year, compared to the same period the previous year. The percentage increase in the CPI-W determines the adjustment, rounded to the nearest tenth of a percent.
2025 COLA Projections
Recent forecasts indicate that the 2025 COLA will be lower than previous years. The average COLA over the past 20 years has been a modest 2.6%, with several years of deflation and minimal increases. The past three years saw higher adjustments due to significant inflation: 5.9% in 2022, 8.7% in 2023, and 3.2% in 2024. However, recent inflation data has led to a revised projection of 2.6% for 2025.
Mary Johnson, a former Social Security and Medicare policy analyst, and The Senior Citizens League (TSCL) now both estimate a 2.6% increase for 2025. This would result in an additional $46.35 per check, based on an average payout of $1,782.74 as of July 2024. Although this adjustment is the smallest percentage increase in four years, it aligns with the average COLA over the past two decades.
Implications of the 2025 COLA
While a 2.6% COLA would increase benefits cumulatively by over 22% by the end of 2024, the lower-than-expected adjustment may not fully address the rising cost of living for many beneficiaries. Despite this, it will mark the first time since 1997 that the COLA has increased for four consecutive years. Although the increase on paper looks positive, the reality for many retirees is that it may not be sufficient to meet their needs.
Overall, while Social Security benefits are growing faster than in recent memory, the lower-than-anticipated COLA for 2025 highlights the ongoing challenge of keeping pace with inflation and ensuring adequate support for retirees.
