The cost-of-living adjustment (COLA) for Social Security in 2025 is expected to be 2.7%, down from the previous estimate of 3%. This change comes after the government reported lower-than-expected inflation in June.
This article will explain what COLA is, why it matters, and how the new estimate might affect seniors and disabled Social Security recipients.
What is COLA?
COLA stands for cost-of-living adjustment. It is a change made to Social Security and Supplemental Security Income (SSI) benefits to counteract inflation.
COLA is based on the consumer price index for urban wage earners and clerical workers (CPI-W). This index measures the cost of goods and services. When the CPI-W rises, COLA increases benefits to help keep up with inflation.
How is COLA Calculated?
The Social Security Administration calculates COLA each year based on the average increase in the CPI-W from July through September. If the CPI-W goes up, Social Security benefits increase. For 2025, the expected COLA is 2.7%.
Why the 2025 COLA Estimate Dropped
In June, the government reported that the consumer price index (CPI) rose by 3% from the previous year, lower than expected. This led to the reduction of the 2025 COLA estimate from 3% to 2.7%. The core CPI, which excludes food and energy prices, also showed lower inflation than anticipated.
Impact on Seniors and Disabled Recipients
A lower COLA means that Social Security benefits will not increase as much as previously thought. This can be tough for seniors and disabled individuals who rely on these benefits, especially since the prices of essential items continue to rise.
Rising Costs of Daily Essentials
- Food: While overall food prices rose by 2.2% in June, the cost of beef roasts went up by 10%, pork chops by 7.4%, and eggs by 10.2%.
- Electricity: Annual electricity prices increased by 4.4%, leading to higher utility bills, especially during record-breaking heat waves.
- Healthcare: Hospital services costs rose by 7.1%, and home healthcare costs increased by 11.4%.
- Housing: Many Social Security recipients spend about half of their income on housing, which saw a 5.4% increase.
FAQs
1. What is the cost-of-living adjustment (COLA)?
COLA is an annual change to Social Security and SSI benefits to keep up with inflation. It’s based on the CPI-W.
2. How is COLA calculated?
COLA is calculated by averaging the CPI-W increases from July through September each year.
3. What is the expected COLA for 2025?
The expected COLA for 2025 is 2.7%.
4. How does inflation affect COLA?
Higher inflation usually leads to a higher COLA, as the CPI-W rises. Lower inflation results in a smaller COLA.
