Understanding How the Social Security Inflation Adjustment Works
Social Security recipients will receive an additional $48 per month on average in 2025 due to the 2.5 percent cost-of-living adjustment (COLA). According to an article by USA Today, the Social Security Administration says these annual benefit increases are designed to “offset the corrosive effects of inflation on fixed income.”
Current COLA Calculator
Social Security COLAs reflect changes in an inflation gauge known as the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), from the third quarter of one year to the third quarter of the next.
Although many Americans are still struggling to make ends meet, inflation has tapered off this year resulting in a much smaller COLA for 2025 than in past years. Next year recipients will receive a modest 2.5 percent increase. In 2024 the COLA was 3.2 percent and it was 8.7 percent in 2022 (the largest COLA increase since 1981).
A Better Option
When you consider that Social Security is the primary source of income for 40 percent of older Americans, a fair COLA calculator must be used. AARP says this will ensure that seniors “have an inflation-protected source of income in retirement.”
The Social Security Expansion Act calls for adopting the Consumer Price Index for the Elderly (CPI-E). It takes the unique spending habits of seniors into account — particularly regarding the cost of healthcare — and offers a more realistic COLA for retirees.
While both the CPI-W and CPI-E measure spending, only the CPI-E looks at expenses that impact older Americans the most, namely healthcare and housing. The CPI-W tends to consider things like gasoline, education, and consumer electronics that are used more by working individuals.
Join Our Cause
For the millions of seniors struggling to get by on Social Security benefits alone, next year’s 2.5 percent COLA simply is not enough. We say it’s time lawmakers take action and enact the Social Security Expansion Act. By adopting the CPI-E, seniors should receive a COLA that reflects how inflation impacts their unique spending habits.
Retirees would also benefit from its across-the-board benefits boost of about $2,400 per year. This landmark piece of legislation would also shore up long-term solvency ensuring that Social Security can pay full benefits now and in the future.
You can show your support for this landmark piece of legislation by joining The Seniors Trust in calling on Congress to enact this bill and signing our petition.
