Seniors could see a Social Security trend that hasn’t happened in more than three decades.
Every year, Social Security payments are updated based on the cost-of-living adjustment, which accounts for the impacts of inflation. Seniors typically see inflation on everything from housing to groceries and healthcare.
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Analysts estimate that in 2025, the Social Security COLA is projected to be 2.7 percent. If that happens, that will be the first time in 31 years that seniors receive a COLA of 2.7 percent or above four years in a row.
Seniors have seen consistently high COLAs since 2022. In 2022, the COLA was set at 5.9 percent and then skyrocketed to 8.7 percent in 2023. For 2024, the COLA was 3.2 percent.
While it’s unclear what exactly the 2025 raise will be, current consumer price index data indicates it could be 2.7 percent next year.
The official COLA won’t be released until October based on the third quarter consumer price index data. That will look at inflation for urban wage earners and clerical workers for July, August and September.
Based on the data from the start of 2024, the COLA would be 2.7 percent for 2025.
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The last time the COLA reached 2.7 percent or above four times in a row was from 1988 to 1993.
While seniors might initially be excited to hear they’re getting larger increases than usual, this trend doesn’t actually mean seniors are gaining more buying power. Instead, their Social Security payments merely reflect the inflation they’re already facing.
The reason for the steady years of high raises is because inflation has been at a consistent high.\
“While this increase for yet another year may feel like an additional layer of support for recipients, there’s a reason it continues to go up in a historic fashion: prices for seniors across the board are significantly higher,” Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, told Newsweek. “It’s a great thing COLA will be providing more financial assistance through its payments, but it’s not a full solution to inflation.”
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Seniors are still likely to need to watch what they’re spending to make the best use of the funds they’re receiving, Beene said.
“The larger implication of the Cola remaining higher means that the prices around seniors remain elevated,” Kevin Thompson, a finance expert and the CEO and founder of 9i Capital Group, told Newsweek.
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“If the cost of everything around you continues to remain elevated or creep higher, that means the net effect of the COLA has less efficacy. If prices remain elevated, you may see seniors having to dip ever further into their retirement accounts and drain down savings at a faster rate.”
