Seniors might be relieved to know there's a new cost of living adjustment (COLA) prediction for 2025, and it sees Social Security recipients getting a higher monthly check.
Social Security payments are adjusted each year by the COLA, which looks at the consumer price index for urban wage earners and clerical workers.
The new prediction for 2025 is set at 3 percent due to higher-than-expected inflation numbers reported this week. Earlier in the year, analysts estimated the COLA would only be as high as 1.75 and 2.4 percent in January and February, respectively.
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Because the consumer price index saw an uptick of 3.5 percent in March compared to a year earlier, the government is likely to increase checks to reflect the inflation that recipients experience on everything from housing to groceries.
Michael Ryan, a finance expert who founded michaelryanmoney.com, said seniors should refrain from celebrating the 3 percent jump, however.
"I'm just not sure that's going to be enough," Ryan told Newsweek. "Seniors are already struggling to afford basic necessities like healthcare, food, and housing. This increase may provide some relief, but I worry it still won't fully protect their purchasing power."
Seniors in particular face some of the most inflationary pressures on housing, healthcare and transportation.
According to the Bureau of Labor Statistics, while shelter costs increased by 5.7 percent year over year, hospital service prices skyrocketed by 7.5 percent. Transportation costs also had an extreme jump, at 10.7 percent.
In 2024, seniors saw a 3.2 percent increase in their Social Security benefits due to inflation, which equaled a boost of roughly $50 to $60 a month. That was a significantly lower boost compared to the 8.7 percent increase in 2023.
Despite these increases in Social Security payments over the years, poverty among those aged 65 and up has been on the rise. The U.S. Census Bureau estimates that poverty rates in this demographic were at 14.1 percent in 2022, up from 10.7 percent in 2021.
There's a dark side to the COLA causing increases in Social Security checks though. Many seniors report owing taxes on their benefits this year whereas in earlier years they were able to avoid this financial penalty.
"This may be a hard pill, no pun intended, to swallow seeing the net effect be negative on your actual take home," Kevin Thompson, a finance expert and the founder and CEO of 9i Capital Group, told Newsweek.
Experts say the larger issue of healthcare and housing remaining unaffordable could block the benefits of the COLA boost for the next year, as many seniors are still barely making enough to cover their living expenses.
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"The three percent increase will certainly go some way to softening the inflation blow, but seniors will more than likely still have to watch what they spend in our current economic climate," Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, told Newsweek.
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
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Suzanne Blake is a Newsweek reporter based in New York. Her focus is reporting on consumer and social trends, spanning ... Read more
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