Retirees are likely to receive some bad news on Thursday when the government announces the Social Security cost-of-living adjustment (COLA) for 2025.
Analysts have predicted a far lower COLA for next year than in recent years, and retirees could face less financial stability as a result, experts say.
The most recent estimate from The Senior Citizens League showed the COLA likely to be at a four-year low of 2.5 percent.
“While we have seen inflation cool over the past year, many consumers aren’t seeing the difference in their wallets. Retirees, in particular, may still be grappling with the increased cost of living if their retirement savings is keeping pace with inflation,” Elizabeth Ayoola, a NerdWallet personal finance and retirement expert, told Newsweek.
A sign outside a U.S. Social Security Administration building, November 5, 2020, in Burbank, California. Seniors should expect a lower COLA for next year’s Social Security.
VALERIE MACON/AFP via Getty Images
Many seniors will likely find a 2.5 percent to be limited compared to the COLA from the past three years, but it’s still a larger boost than average.
“It’s in line with our economic reality at the moment, as inflation does seem to finally be cooling, which will affect the year-over-year increase in benefits we will see from government programs moving forward,” Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek.
This year, seniors saw a 3.2 percent increase, while 2023 saw a boost of 8.7 percent.
“The annual COLA is intended to keep the buying power of Social Security steady even as inflation rises,” Ayoola said. “This increase might feel small to recipients compared to 2023, but it is not unexpected and will not likely have large impacts for most.”
Ayoola said inflation is not uniform, however, and some food items like eggs and other staples have climbed farther than the general inflation rate.
While any uptick in benefits would be welcome, seniors would need to carefully budget what they’re receiving, especially as many will see higher prices at the grocery store and on health care, Beene said.
“Just because inflation is cooling doesn’t mean prices are necessarily dropping, but rather that they’re no longer increasing,” Beene said. “Seniors have to make the best use of the benefits, even if they’ll have a tad more in their check next year.”
All in all, seniors will likely earn an extra $48 more each month, which might do little to address many recipients’ economic realities.
“Sure, overall inflation’s cooling down, which sounds good on paper,” Michael Ryan, a finance expert and the founder of michaelryanmoney.com, told Newsweek. “But here’s the problem, and I see this with people every single day: Senior costs aren’t following the same pattern.”
For many, rent, medical bills, and groceries still are skyrocketing past the levels of previous years.
“I’ve been doing this long enough to know that Social Security was never meant to be someone’s only income in retirement,” Ryan added. “But that’s exactly what it’s become for too many people. “
