According to The Senior Citizens League (TSCL), social security benefits may increase by nearly three percent next year due to a cost of living adjustment (COLA) stemming from inflation. However, TSCL recognizes that the final COLA for 2025 can differ from these estimates as inflation data keeps fluctuating throughout this year, meaning that upward or downward adjustments to the 2.66 percent COLA estimate are possible. The official 2025 COLA announcement will be made by the Social Security Administration in October.
TSCL’s executive director, Shannon Benton, pointed out that even with COLA increases, social security benefits are not helping beneficiaries to cope with the rising cost of living. In 2024, the average Social Security benefit increased by $50.00, but after subtracting $9.80 to cover Medicare Part B Premium increases, the total change in benefits came out to just $40.20 a month. With the forecast of a 2.66 percent COLA for 2025, it appears seniors will continue to face financial insecurity as much next year as they have this year.
TSCL’s 2024 Senior Survey revealed that 71 percent of respondents highlighted an increase in household costs exceeding the 3.2 percent COLA they received for 2023. Almost three in five seniors were facing financial difficulties, with one in five continuing to work despite collecting social security. An additional two in five seniors said they planned to get a job because of the modest COLA boost.
Due to financial pressure from inflation and weak COLA adjustment for 2024, 64 percent of seniors said they planned to cut back on discretionary spending, and 36 percent on essentials. Sixteen percent aimed to make use of community resources or assistance, while 11 percent intended to shift to more affordable health care options. The survey report said that “the 2024 COLA increase has illuminated significant financial stress among seniors collecting Social Security, highlighting the widening gap between Social Security benefits and the rising cost of living.”
Social Security comprises two trust funds – the federal Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) programs. When the combined funds run dry in 2035, Social Security can only pay out 83 percent of scheduled benefits from that year onward.
Earlier this month, President Joe Biden proposed raising taxes on wealthier Americans to deal with the fund’s insolvency issues. Last year, a group of Democrat and independent senators proposed the Social Security Expansion Act seeking to raise payroll taxes on some of the highest earners in the United States, a move they claimed would keep the OASI fund solvent through 2096.
The proposed tax hike “on workers, savers, investors, and small business owners would distort positive activities and cause significant economic damage,” the foundation stated. In a January 2023 video message, former President Donald Trump told Republicans that “under no circumstances” should they vote to reduce “a single penny” from social security.
The bill passed the House 96-0, but some have opposed the measure. Kelly Allen, executive director of the West Virginia Center on Budget and Policy, said that “continued efforts to erode and eliminate the personal income tax are undermining our ability to meet the needs of seniors, children, and families across our state.”
In conclusion, with inflation on the rise and the widening gap between social security benefits and the cost of living, seniors are facing significant financial stress. While a 2.66 percent COLA increase for 2025 may provide some relief, it falls short of mitigating rising living costs. The Social Security Administration’s announcement in October will be eagerly awaited to see if the final COLA adjustment is higher, but one thing is clear: something must be done to address the insolvency issues facing the Social Security fund
