In a recent announcement, the Social Security Administration stated that the cost-of-living increase for 2025 is expected to be 2.5%, a decrease from previous years. This news comes as a blow to many retirees who are struggling to make ends meet in the face of rising inflation. Sherri Myers, an 82-year-old resident of Pensacola City, Florida, shared her concerns about the increase, stating that it won’t be enough to cover her day-to-day expenses. With her savings depleted by inflation, Myers is now looking for work to supplement her retirement income, which consists of a small pension and Social Security benefits.
According to the AARP, a 2.5% increase in the COLA would only amount to an additional $48 per month for the average retiree receiving around $1,920 monthly starting in January 2025. While this may help slightly, many seniors feel that it still won’t be enough to keep up with rising prices. However, AARP Senior Vice President of Government Affairs Bill Sweeney sees a silver lining in the situation, stating that the modest increase is a sign that inflation is starting to moderate.
The announcement of the smaller COLA increase comes at a time when the Social Security program is facing a severe financial shortfall. The annual Social Security and Medicare trustees report released in May revealed that the trust fund will be unable to pay full benefits beginning in 2035. The report also stated that if the trust fund is depleted, the government will only be able to pay 83% of scheduled benefits. To offset this shortfall, analysts predict that the maximum amount of earnings subject to Social Security payroll taxes will increase to $174,900 in 2025, up from $168,600 in 2024.
On the presidential campaign trail, Vice President Kamala Harris and former President Donald Trump have proposed differing plans on how to strengthen Social Security. Harris focuses on making millionaires and billionaires pay their fair share in taxes, while Trump promises not to make any cuts to the program or change the retirement age. Various lawmakers have also proposed solutions to deal with the funding shortfall, with the Republican Study Committee’s Fiscal Year 2025 plan suggesting raising the retirement age and reducing the annual COLA. However, advocacy groups like Social Security Works have expressed concerns about potential benefit cuts for retirees under these proposals.
In an effort to address the issue of rising costs for retirees, Harris previously co-sponsored a bill that called on the Social Security Administration to use a different index, the CPI-E, to calculate cost-of-living increases. This index takes into account the spending patterns of the elderly, including healthcare, food, and medicine costs, in order to provide a more accurate reflection of their financial needs. While the future of Social Security remains uncertain, it is clear that the program plays a vital role in providing financial security for millions of Americans in their retirement years.
