Approximately 70.6 million Social Security recipients are expected to see a smaller cost-of-living adjustment (COLA) for 2025, primarily due to recent moderation in inflation. Analysts predict that the Social Security Administration will officially announce a 2.5% increase in benefits for the upcoming year, contrasting with the 3.2% COLA received in 2024 and a substantial 8.7% increase in 2023, which was driven by the highest inflation levels in four decades.
Sherri Myers, an 82-year-old resident of Pensacola City, Florida, remains skeptical about the upcoming COLA. While she will receive an increase in her benefits, she doubts it will substantially help her cover daily expenses. “It won’t make a dent,” she said, highlighting the challenges she faces as inflation has already eroded her savings. To supplement her income, which consists of a modest pension and Social Security payments, Myers is actively seeking employment.
She is not alone in her concerns. For the average retiree receiving about $1,920 per month, the predicted 2.5% COLA for 2025 would result in an increase of $48 in monthly benefits, according to AARP estimates. Bill Sweeney, Senior Vice President of Government Affairs at AARP, noted that many seniors may find this increase insufficient to keep up with rising living costs. “I think a lot of seniors are going to say that this is not really enough to keep up with prices,” he remarked. However, he also acknowledged that the smaller COLA reflects an overall moderation in inflation, which could be viewed as a positive economic sign.
This announcement comes during a time of significant long-term financial challenges for Social Security. The Social Security and Medicare trustees’ report released in May projected that the Social Security Trust Fund will be unable to pay full benefits starting in 2035. If the fund becomes depleted, the government would only be able to pay 83% of scheduled benefits. Social Security is primarily funded through payroll taxes collected from both workers and their employers. For 2024, the maximum amount of earnings subject to Social Security payroll taxes was set at $168,600, an increase from $160,200 in 2023. Analysts expect this limit to rise to $174,900 in 2025.
The impact of the COLA on Social Security’s funding shortfall has become a focal point as the 2024 presidential campaign unfolds, with candidates offering differing proposals to address the program’s financial challenges. Vice President Kamala Harris has pledged to protect Social Security by ensuring that the wealthiest Americans contribute more in taxes. On her campaign website, she emphasizes the need for “making millionaires and billionaires pay their fair share in taxes” to safeguard the program.
Former President Donald Trump, conversely, has promised not to cut Social Security or raise the retirement age. He has also expressed support for tax cuts for older Americans, declaring on Truth Social, “SENIORS SHOULD NOT PAY TAX ON SOCIAL SECURITY!” Trump reiterated in an AARP interview that he has no intention of making any changes to Social Security, stating, “I don’t want to do anything having to do with increasing age. I won’t do that.”
Harris, in her own AARP interview, advocated for addressing the program’s funding gap by taxing billionaires and large corporations. “We will make up for the shortfall by making billionaires and big corporations pay their fair share in taxes and use that money to protect and strengthen Social Security for the long haul,” she said.
The issue of Social Security’s financial sustainability extends beyond these two candidates, as various legislative proposals have emerged to tackle its challenges. The Republican Study Committee’s Fiscal Year 2025 plan, for instance, suggests reducing costs by increasing the retirement age and cutting the annual COLA. However, Trump has not endorsed this plan. Social Security Works, an advocacy group supporting the program, has expressed concern regarding the Republican Study Committee’s proposals. Linda Benesch, a spokesperson for the group, stated, “We are concerned about this Republican Study Committee budget, and the provisions in it that would cut benefits for retirees.”
Social Security Works has endorsed Harris for president, citing her commitment to protecting the program. As a senator from California, Harris co-sponsored a bill advocating for the use of the CPI-E, a consumer price index tailored to the elderly, to calculate COLA. This index takes into account the specific spending patterns of older Americans, particularly regarding healthcare and prescription drug costs, which tend to rise faster than other expenses. Currently, the COLA is calculated using the Bureau of Labor Statistics’ Consumer Price Index (CPI), which measures broader price changes across the economy.
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