Bad News coming for Retirees – New increase in Social Security checks is not what was expected

According to Lagradaonline, As the October 10 announcement approaches, many Social Security beneficiaries are bracing for what may turn out to be a smaller cost-of-living adjustment (COLA) than anticipated. This update is crucial as it directly affects the purchasing power of millions of retirees who depend on these benefits to cover their living expenses.

How Social Security Checks Are Adjusted

The Social Security Administration (SSA) updates benefits annually through COLA to help recipients cope with inflation. This adjustment is designed to ensure that Social Security payments keep pace with the rising cost of goods and services. Historically, from 1940 to 1974, changes to benefits were made through special Congressional sessions rather than through a standardized adjustment mechanism. Since 1975, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) has been used to track inflation and determine the annual COLA.

The CPI-W monitors a range of spending categories and subcategories, each with a specific weight that reflects consumer spending patterns. The COLA is calculated based on the average CPI-W readings for the third quarter of the current year compared to the same period in the previous year. The percentage increase in the CPI-W determines how much Social Security benefits will be adjusted, rounded to the nearest tenth of a percent.

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COLA Projections for 2025

Recent forecasts suggest that the 2025 COLA will be lower than previous years. The average COLA over the past two decades has been just 2.6%, reflecting periods of deflation and minimal increases. However, the past few years have seen higher adjustments due to significant inflation, with 2022 and 2023 experiencing unusually high increases of 5.9% and 8.7%, respectively. The current projection for 2025 is a more modest 2.6%, according to both The Senior Citizens League (TSCL) and Mary Johnson, a former policy analyst at TSCL.

If this projection holds true, beneficiaries will see an average increase of approximately $46.35 per check, based on the average July 2024 payout of $1,782.74. This adjustment will be the smallest percentage increase in four years but aligns with the average COLA seen over the past two decades. Notably, it will mark the first time since 1997 that the COLA has increased for four consecutive years.

Impact and Considerations

While the projected 2.6% COLA would result in a cumulative increase of over 22% in benefits by the end of 2024, this adjustment may still fall short of many beneficiaries’ needs. The relatively small increase is a reflection of the reduced inflation rates observed in recent months, which have led to lower projections for next year.

For many retirees who rely heavily on Social Security as their primary source of income, this adjustment is crucial for maintaining their purchasing power. Despite the lower-than-expected increase, the sustained COLA adjustments over the past few years have provided some relief, but the challenge remains to match these benefits with the rising cost of living.