By Edward Cates, Chairman, TSCL
The Social Security Administration announced that 2025’s COLA will be 2.5 percent on October 10. On average, retired workers’ Social Security checks will increase by $48 on January 1, 2025 from$1,920 to $1,968.
The Social Security Administration calculated the COLA by taking the average of the change in the Consumer Price Index for Urban Wage Earners (CPI-W) for July, August, and September. The CPI-W is one of the government’s key measures of inflation, which cooled rapidly during the third quarter of 2024. After hovering near or above 3 percent for most of the year, it came in at 2.9 percent for July, 2.5 percent for August, and 2.2 percent for September.
The sad fact is that, just like this year, COLAs have often disappointed over the last decade and a half. TSCL’s 2024 Loss of Buying Power report estimates that Social Security checks have lost approximately 20 percent of their value since 2010 due to inadequate COLAs. According to another one of our studies, the 2024 Retirement Survey, which had more than 3,000 responses at the time of this writing, 72 percent of seniors said that passing laws that ensure COLAs better reflect older Americans’ changing costs should be a top priority for Congress.
One modest change that would help COLAs better capture seniors’ rising experiences would be changing the index used to calculate them. In fact, such an index already exists: The Consumer Price Index for the Elderly, also known as the CPI-E. The CPI-E weights different spending categories to better reflect the typical budget for senior households, and often comes in higher than the CPI-W.
For example, if the COLA for 2025 was calculated with the CPI-E instead of the CPI-W, it would have come in at 3 percent, a difference of $10 per average monthly check. That may not seem like much at face value, but that small difference can add up to tens of thousands of dollars over the course of a long retirement.
TSCL also advocates many other changes to help ensure that seniors receive the benefits they deserve after paying into Social Security for a lifetime. We advocate for establishing a minimum COLA of 3 percent, as well as providing a one-time boost to Social Security payments to make up for decades of lost buying power. We push for legislation that would better fund Social Security into the future, such as raising the Social Security payroll tax and removing the wage limit for program contributions.
In other words, while we have long expected that this year’s COLA would be disappointing, we’re not going to accept that. We’re going to keep fighting for you and your right to a dignified retirement.
