New inflation data surprises Wall Street – here’s what it means for Social Security uplifts for next year

The Social Security Administration has announced a 2.5 percent cost-of-living adjustment for more than 72.5 million Americans through 2025.

The cost-of-living adjustment, or COLA, is the annual increase in the monthly Social Security benefits that millions of seniors depend on.

The increase will increase retired workers’ average benefits by $48, to $1,968 per month.

The Social Security Administration confirmed the change in a post on social media site

A nonpartisan group, the Senior Citizens League (TCSL), has called the COLA increase “disappointing” after announcing a 2.5 percent increase in benefits.

The group said the metric used to calculate the annual increase fails to measure inflation as seniors experience it.

Shannon Benton, executive director of TCSL, said this year marks “another missed opportunity to provide seniors with the financial assistance they deserve” by changing the COLA calculation, which would “better reflect seniors’ changing spending.”

She proposed setting a minimum COLA of 3 percent.

“Our research shows that 67 percent of seniors rely on Social Security for more than half of their income and 62 percent worry that their retirement income won’t even cover essentials like groceries and medical bills,” Benton added to it.

Nearly 68 million Social Security beneficiaries will see a 2.5 percent cost-of-living adjustment starting in January 2025, the Social Security Administration said in a statement.

Increased payments to nearly 7.5 million people receiving Supplemental Security Income (SSI) funds will also begin on December 31, 2024, it added.

“Social benefits and SSI payments will increase in 2025, helping tens of millions of people keep up with spending even as inflation begins to cool,” said Social Security Commissioner Martin O’Malley.

Some other adjustments that come into effect each January are based on the increase in average wages.

Based on that increase, the maximum amount of income subject to the Social Security tax will increase from $168,600 to $176,100.

The Social Security COLA is the lowest annual increase since 2021, when beneficiaries received a 1.3 percent increase in benefits.

In 2024 there was an increase of 3.2 percent and in 2023 there was an increase of 8.7 percent.

The 2023 figure was the highest in four decades, in response to record high inflation.

In 2022, benefits increased by 5.9 percent.

As the pace of inflation slows toward the Federal Reserve’s 2 percent target, the COLA adjustment has fallen toward the historical norm.

According to the independent group Senior Citizens League, benefit increases have averaged about 2.6 percent over the past two decades.

Consumer prices rose 2.4 percent from a year earlier in September, according to new data released Thursday by the Bureau of Labor Statistics.

This was higher than expectations, which expected inflation of 2.3 percent on an annual basis.

But it was a slowdown from 2.5 percent in August.

On a monthly basis, the consumer price index rose by 0.2 percent through September – also above economists’ expectations.

Much of the price increase was due to food and housing costs, the Labor Ministry said.