If you are a beneficiary of Social Security and any of its programs, you will understand that every year the Social Security Administration (SSA) defines an increase for benefits based on inflation. It is known as a cost-of-living adjustment (COLA), and its purpose is for all Social Security beneficiaries to be able to deal with inflation.
Do you remember that unprecedented inflation of the year 2023 that was 8.7%? Rarely has there been such a high number of QUEUE. The adjustment only applies to Social Security benefits and is unlikely to be repeated in 2025.
The SSA is already preparing to announce a higher-than-expected COLA adjustment for next year. This adjustment is essential to adapt the benefits to the growing cost of living and is calculated based on the so-called Consumer Price Index for Urban Wage Earners and Office Workers (CPI-W).
How Much Will Retirement and Other Benefits Grow in 2025?
Since the CPI-W registered an increase of 3.4% in April and a significant drop is not expected in the short term, experts have been considering a considerable increase in profits. Mary Johnson, a retired Social Security and Medicare analyst, suggests that the adjustment could be around 3.2%, which is a noticeable increase compared to the typical adjustments of previous years, which were around 2.6%.
“The recent data highlights an unprecedented economic scenario in the post-pandemic era, one that necessitates a robust response to prevent further erosion of retiree purchasing power,” Johnson explains.
As we said, this trend reflects significant changes and is moving away from that shocking 8.7% that was increased in 2023 as an economic measure to mitigate the negative effects of the COVID-19 pandemic.
The Impact of Inflation on Retirees and Social Security Recipients
Despite the projected increase, rising inflation will continue to put pressure on Social Security benefits, since their incomes are fixed and not variable and they depend on the COLA increase to be able to cope with the increase in prices of the basic basket and other expenses such as health and housing.
Pension and economic experts have already warned that the 3.2% increase at the beginning of 2024 was quickly insufficient, as the inflation rate exceeded the benefit adjustment in March and April. This has left many retirees in a worse situation, struggling to cover their basic needs as their purchasing power decreases.
The situation is particularly worrisome for those who are pushed into higher tax brackets due to the most significant increases in recent years or who reside in states where Social Security income is subject to double taxation, worsening their financial situations.
Will Inflation Have a Big Impact on Retirees?
Unfortunately, inflation is likely to have a negative impact on retirees, but also on other vulnerable groups such as people with disabilities who receive Supplemental Security Income (SSI) or people who are temporarily disabled who receive Supplemental Security Disability Insurance (SSDI).
In the last year, rents have increased by 5.6%, and although gasoline prices have shown a slight alignment with expected trends, they still represent a considerable burden for those who depend on cars for their daily commutes.
