The Social Security Administration (SSA) recently announced a 2.5% cost-of-living adjustment (COLA) for 2025. This increase, which amounts to about $50 per check on average, has left many Americans feeling frustrated and disappointed. The COLA is meant to help Social Security benefits keep up with inflation.
However, the 2.5% bump falls short of the past decade’s average of 2.6% and the 3.2% increase received in 2024. Many recipients believe this adjustment will not adequately cover the rising costs they face. On social media, seniors expressed their struggles.
“I am a senior and I am having a very rough time,” one person shared. Another replied, “I feel terrible for anyone on a fixed income. How were middle- and lower-class people supposed to prepare for this?”
The COLA is determined using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
It compares the index from the third quarter of the previous year to the same quarter of the current year. This method has been used since 1983. Retirees argue that the COLA fails to reflect the true increases in their living expenses.
Data from the Bureau of Labor Statistics shows that hospital stay costs jumped 6.9% in June 2024 compared to the prior year. This far exceeds the 3% rise for all goods and services.
Frustration over 2025 Social Security COLA
Home health aide costs also climbed 10%, reaching a median annual cost of $75,500. Retirees can take steps to reduce their reliance on Social Security benefit increases:
1. Enroll in Medicare.
This program helps pay for many health-related costs. Part A is usually premium-free for those who have paid Medicare taxes for at least 10 years. Part B covers outpatient care and has a monthly premium around $175, based on income.
2. Pay off high-interest debt. Eliminating high-interest debts like credit cards can provide significant financial relief.
In 2023, baby boomers had an average credit card debt of $6,642, with interest rates averaging 24.72%. 3. Invest COLA money.
Putting the COLA increase into an index fund or other low-risk investments can generate additional returns. Historically, the S&P 500 has delivered an average annual return exceeding 10%. The 2.5% COLA for 2025 offers some help, but many retirees and those on fixed incomes say it is not enough to match the actual increases in their cost of living.
