In 2025, Social Security recipients will see a modest $48 increase in their monthly checks due to a 2.5% Cost of Living Adjustment (COLA).
While any increase is better than none, many retirees are voicing dissatisfaction.
Rising costs for essentials like healthcare, housing, and utilities continue to outpace this modest boost, leaving retirees struggling to make ends meet.
What is COLA?
Understanding COLA Adjustments
The Social Security Cost of Living Adjustment (COLA) is designed to help benefits keep pace with inflation.
It’s calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which tracks changes in the prices of goods and services.
However, the CPI-W doesn’t fully reflect the spending habits of seniors, especially their higher healthcare costs.
Key Details for 2025
- COLA Rate: 2.5% increase.
- Average Monthly Benefit: $1,907 (2024).
- Monthly Increase: Approximately $48.
- Medicare Part B Premiums: Expected to rise by $10.30, partially offsetting the COLA.
This year’s COLA is notably smaller than past adjustments, including the 3.2% increase in 2024 and the massive 8.7% hike in 2023, which was the largest in over 40 years.
Why Are Retirees Upset?
Healthcare Costs Erode Gains
Healthcare remains one of the fastest-growing expenses for retirees. In 2025, Medicare Part B premiums are set to increase by $10.30 to $185 per month, eating into the modest COLA boost.
Many seniors feel like they’re running in place, with COLA increases being swallowed by medical expenses.
Rising Essentials
Essentials like housing, utilities, and groceries have seen persistent price increases:
- Housing: Rent and property taxes continue to climb in many areas.
- Utilities: Energy costs remain high, disproportionately impacting those on fixed incomes.
- Groceries: Food inflation, though moderating, remains significant.
For retirees, whose budgets are often stretched thin, these rising costs far outweigh the $48 monthly increase.
Inadequate COLA Formula
Critics argue that the CPI-W, used to calculate COLA, fails to reflect the true costs retirees face.
A better alternative might be the Consumer Price Index for the Elderly (CPI-E), which accounts for the higher healthcare and housing costs that seniors typically experience.
Using the CPI-E could result in more accurate and meaningful benefit adjustments for retirees.
Impact on Retirees
Research highlights the growing financial struggles of older Americans:
- Nearly 50% of seniors are unable to meet basic expenses such as housing, food, and transportation.
- Rising medical costs disproportionately affect retirees, many of whom allocate a large portion of their budgets to healthcare.
For millions of retirees, the modest COLA adjustment doesn’t even begin to close the gap between their fixed income and their living expenses.
Calls for Reform
Advocacy groups and retirees are calling for significant reforms to how COLA is calculated.
The proposed adoption of the CPI-E could better reflect retirees’ spending habits, especially the rising costs of healthcare and housing.
What Would Change?
- Higher COLA Rates: Using the CPI-E could result in larger annual adjustments, helping seniors keep up with inflation.
- More Equitable Increases: The adjustments would better align with the true cost pressures faced by retirees.
The Bigger Picture
While the $48 monthly increase might sound like a win, it’s a drop in the bucket for many retirees facing mounting financial pressures.
Without meaningful changes to how COLA is calculated, Social Security will continue to fall short of addressing the needs of older Americans.
