Retirees rely on Social Security benefits to make ends meet, with 60% considering it a major income source and 28% as a minor one. The annual cost-of-living adjustment (COLA) is eagerly awaited by many, as it helps beneficiaries keep up with inflation and potentially collect more money each year. However, the reality is that the COLA may not be as impactful as expected.
The Senior Citizens League projects a 2.63% COLA for 2025, but the official figure won’t be known until October when the Social Security Administration makes its announcement. While receiving larger checks is exciting, the COLA may not make a significant difference going forward.
Despite annual adjustments, Social Security benefits have lost 36% of their buying power since 2000, according to a study from The Senior Citizens League. To maintain the same buying power as in 2000, current beneficiaries would need an extra $516.70 per month.
The average retired worker currently collects around $1,900 per month, and if the 2025 COLA does land at around 2.6%, it would only amount to around $49 more per month for the average retiree. This increase may not be sufficient to offset the rising costs faced by many retirees. A study from The Senior Citizens League found that two-thirds of seniors reported their monthly costs increasing by 10% between 2022 and 2023.
Projected 2.63% COLA for 2025: Is it enough for retirees?
The situation is concerning, as the COLA is not keeping up with the actual rise in living expenses. This creates financial challenges for retirees, especially as they struggle with increasing costs. As Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League, puts it, “The COLA is intended to help beneficiaries maintain their purchasing power in the face of rising prices, but it’s clear that it’s not keeping up with the real costs that seniors are facing.“
The impact of the COLA is further diminished by the fact that healthcare costs, which are a significant expense for retirees, have been rising faster than general inflation. This means that even with a COLA increase, retirees may still find it difficult to cover their healthcare expenses.
The situation calls for attention and action to address the growing gap between Social Security benefits and the actual cost of living. As Johnson emphasizes, “Congress needs to adopt a more accurate cost-of-living index and enact policies that provide more adequate annual COLAs for Social Security recipients.” Without such measures, retirees may continue to face financial strain despite the annual adjustments intended to help them keep up with inflation.
