Early this month, on October 10, the new cost-of-living adjustment (COLA) number was released. Every year, the Social Security Administration announces COLA, which tells people how much their Social Security income will go up in the new year.
Some people who get the COLA may be upset or shocked by the new number for 2025 because the raise is not as high as it has been over the last four years.
New COLA statistic appears worrying for some retirees
Payments from Social Security are going to go up by 2.5% in 2025. Along with this new report, there is also new information about the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of last year.
The CPI-W is a measure of how much a mix of goods on the market costs for people who mostly work in blue-collar jobs. The CPI-W is found by taking the average price of more than 200 items, including food, drinks, housing, transportation, and other everyday items.
The CPI-W tells COLA how much payments need to go up so that beneficiaries can keep up with rising costs. It does this by looking at patterns in price changes for different goods.
Many people may be worried that the new COLA number is the lowest it has been since before the COVID19 pandemic, since the cost of living is so high right now. The COLA for this year was set at 3.2%, while it was 8.2% the year before it.
Lower increases are not to be a cause of alarm
It might seem counter intuitive to want your payments to go up less each year, but a lower COLA is actually what you want. Cost of living increases cause the COLA to go up because it is based on the CPI-W.
A smaller COLA, on the other hand, shows that inflation is slowing down and prices are stopping to rise. Because of this, there is no need for a bigger payment rise since the cost of living is not going up as much.
Most of the time, COLA goes up by about 2% every year. The fact that COLA is now more in line with normal trends than it has been since the pandemic shows that the economy may finally be getting back on track.
In the past four years, the cost of living has gone through the roof. Low- and middle-income families have felt this the most. A lower COLA means that prices are going up less, but it also means that prices are getting close to where they were before.
Good news for beneficiaries, but payments are still not enough
Even though it is good news that the economy is starting to get better, most people who get Social Security live from paycheck to paycheck.
Social Security is supposed to be an extra source of income, but for most people who get it, it is their only source of income.
Even though the cost of living may be leveling off, the funds that beneficiaries get are often still not enough to cover all of their monthly bills, especially if they have people who depend on them.
Some people have also said that the fact that COLA is based on the CPI-W hurts users because most people who get benefits do not work. So, their buying habits are different from those of the people the CPI-W tracks.
This means that changes in the products that Social Security recipients do buy are not always taken into account in the COLA number. As a result, the number does not always show a true payment increase to help recipients meet their monthly costs.
In January 2025, the first set of the new COLA payouts will be sent out. People who get Social Security should know that their payment raises will be different from person to person because the amount people get is not a flat amount.
Also see:-Important changes to SNAP benefits starting in November – Full benefit payment schedule
