According to Vibes.okdiario, In the sunny city of Pensacola, Florida, 82-year-old Sherri Myers faces significant financial challenges. The upcoming Social Security cost-of-living adjustment (COLA) set for January offers little hope of relief. “It won’t make a dent,” Sherri says as she worries about covering her daily expenses.
Sherri’s story is a familiar one for many retirees. “Inflation has eaten up my savings,” she confides. Without any financial reserves, she is in a precarious position. Despite the upcoming COLA, Sherri has begun looking for work to supplement her modest pension and Social Security benefits.
Impact of the Social Security COLA Increase
Approximately 70.6 million Social Security recipients are expecting a smaller COLA in 2025 compared to previous years. This is due to moderating inflation, which has lessened the need for large adjustments. The Social Security Administration will announce the official COLA on Thursday, with analysts predicting a modest increase of around 2%.
Retirees like Sherri worry about whether the COLA will be enough to cover their rising expenses. Inflation has already diminished their savings, and without a solid financial cushion, many are turning to alternative income sources.
While the 2025 Social Security benefits are projected to increase by around 5%, previous years saw a 3.2% boost in 2024 following a notable 8.7% increase in 2023, driven by the highest inflation rates in over four decades.
The Financial Challenge Ahead for Retirees
The AARP expects that a 2.5% COLA will raise the average retiree’s monthly benefit by $48, bringing the total to around $1,920 starting in January 2025. However, many seniors feel this won’t be enough. Bill Sweeney, AARP Senior Vice President of Government Affairs, stated, “I think a lot of seniors are going to say that this is not really enough to keep up with prices.” Still, he points out that the adjustment reflects a moderation in inflation, a small silver lining.
The announcement comes as Social Security faces a financial crisis. According to the May Social Security and Medicare trustees report, the program’s trust fund may not be able to sustain full benefit payouts starting in 2035, leaving the government to cover only 83% of scheduled benefits if funds are depleted.
Funding Social Security: How It Works
Social Security is funded primarily through payroll taxes collected from both workers and employers. In 2024, the maximum earnings subject to these taxes increased to $168,600, up from $160,200 in 2023. Analysts predict that this figure will rise again in 2025, reaching $174,900.
Political Proposals to Protect Social Security
As Social Security’s financial future remains uncertain, political figures are proposing various plans to strengthen the program. Vice President Kamala Harris suggests making “millionaires and billionaires pay their fair share in taxes” to protect the program. Former President Donald Trump has put forward a competing plan as part of his campaign to bolster Social Security, though the details of his proposal remain to be fully outlined.
For now, retirees like Sherri Myers must navigate an uncertain financial landscape as they balance their fixed incomes with rising living costs.
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