October not only brings with it the celebration of Halloween, All Saints’ Day and the Day Columbus Discovered America, but it is also a very important month for those who rely on Social Security benefits.
On October 10, 2024, the Social Security Administration (SSA) will announce the cost-of-living adjustment (COLA) for 2025, news that could significantly impact the pocketbooks of 70 million retirees.
But what is the COLA (Cost of Living Adjustment)?
The COLA is an annual adjustment designed to compensate for the loss of purchasing power caused by inflation. This means that even if you get a $100 check today, its real value could decrease over time if prices continue to increase. Beginning in 1975, this adjustment has been made automatically, eliminating the need for an act of Congress each time a benefit increase is required.
To calculate the COLA, the Consumer Price Index for Urban Workers (CPI-W), which reflects changes in the cost of a variety of essential goods and services, is used. The SSA compares the average CPI-W for the third quarter of the current year to the same quarter of the previous year. If there is an increase, that percentage becomes the COLA for the following year.
Experts are already announcing a possible increase in the COLA
With September inflation data about to be released, expectations are high. The Senior Citizens League has projected a 2.5% increase in Social Security benefits for 2025, which would mark the lowest increase since 2021, though still in line with the 2.6% average over the past 20 years.
This increase, while modest, could provide needed relief for many retirees facing the rising cost of living. It is important to remember that, at times, the CPI-W may not increase, resulting in the absence of a COLA, a situation that has occurred three times since 1975.
Waiting and its impact
The COLA disclosure is not just an administrative event; it is a date marked on the calendar of those who depend on these benefits. An increase in benefits can make a noticeable difference in the quality of life for retirees, who already face significant economic challenges.
The October 10 announcement will be more than a number; it will be a promise of support in times of economic uncertainty. In the meantime, it is crucial that beneficiaries stay informed and prepared for the impact of this decision.