The 2025 Social Security Cost of Living Adjustment (COLA) for 2025 was long anticipated, but the 2.5% rise announced in October has many beneficiaries wondering how they can make ends meet with such a small boost.
Prior increases following the pandemic were substantial, and while they were due to high inflation rates, they did assist those in need in affording their lifestyle; however, given that the 2024 increase was quickly surpassed by inflation in the first six months of the year, many beneficiaries are concerned that the 2.5% increase will suffer the same fate and even sooner.
Beneficiaries receiving Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI) are particularly concerned because they are among the most vulnerable and have the greatest requirements. Their fear about being able to make ends meet is exacerbated by the increase in Medicare Part B rates, which have risen by roughly $10 for 2025.
It might not appear to be a large increase, but given that the average benefit increase is less than $50, the increased Medicare cost will take a significant portion. Leaving little money to cover all other increasing expenses.
The actual effect of the COLA on Social Security benefits
The data backs up this concern; a study conducted by legal firm Atticus prior to the COLA announcement in October found that three in five disability beneficiaries were “concerned about their future financial stability” after learning of the projected increase (which proved to be correct).
Nearly 60% of individuals receiving disability benefits are considering obtaining an additional source of income to mitigate the impact, but this could disrupt their payments and affect their quality of life, so it is a delicate balance.
The poll also discovered that more than half of respondents, or 58%, believe COLA increases should better reflect the cost of living. There have been some discussions about utilising a better index, but Congress has made no attempt to implement the adjustment.
Furthermore, 49 percent of participants believed the SSA should give “extra financial support for essential costs, like healthcare and housing,” while 45 percent backed a minimum guaranteed benefits level to provide financial stability. Measures that are unlikely to be accepted.
Darcy Milburn, director of Social Security and health care policy at The Arc of the United States, stated that “there is no question that SSI benefits should be increased. Congress should also modernise outmoded policies that keep SSI users in poverty, penalise them for marrying, create impediments to employment, and limit their financial independence.”
However, some experts, such as Cliff Ambrose, founder and investment manager at Apex investment, maintain a positive attitude on a low COLA, arguing that, while it “might seem like a bad thing at first,” the lowering inflation it is associated with is a good thing.
“When inflation is high, everyday commodities such as groceries, electricity, and healthcare become more expensive, necessitating a higher COLA to assist retirees keep up with rising prices.
However, if inflation decreases, prices stabilise, and retirees may not require as substantial an adjustment to preserve their purchasing power. So, while a lower COLA may result in a lesser rise in Social Security payouts, it also indicates that retiree dollars will go further because prices are not rising as quickly.”
However, those who deal with the issues on a daily basis have a different perspective. Shannon Benton, executive director of TSCL, stated that “Seniors—and TSCL—demand that Congress takes immediate action to strengthen COLAs to ensure Americans can retire with dignity, such as instituting a minimum COLA of 3 percent.”
The situation has become so grave for some that The Motley Fool ran a poll of 2,000 American retirees on October 11, the day after the revelation, and discovered that 50 percent are considering giving up retirement to earn more money.
