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Digging a little deeper into the 2025 Social Security COLA

Social security paper check

On Oct. 10, Social Security recipients got the annual word on how their benefits will change in the coming year. It was not exactly the news many had hoped to hear.

The 2.5 percent increase for 2025 for around 68 million retirees and disabled workers who receive Social Security payments was one of the lowest in recent years.

Recipients’ grumbling about the 2025 increase also were likely influenced by this year’s 3.2 percent hike, and the 8.7 percent boost in 2023 when inflation was at an historic level.

Fixed-income folks also are still worried about inflation.

Although it has eased, the latest Consumer Price Index report, also issued last Thursday, found inflation rose 2.4 percent year-over-year in September.

So seniors who rely mostly on Social Security monthly benefits will just barely beat that level. And that doesn’t take into account their other expenses, including Medicare, that likely will increase.

The politics of Social Security: Knowing that senior citizens are consistently the most reliable voting bloc, some politicians are focusing on their financial struggles. Notably, Donald J. Trump, the former president hoping to resume that position in 2024 as the Republican nominee, says he’ll end taxes on Social Security benefits.

That, however, could alienate another crucial voting segment, young people.

That political tax dilemma is this weekend’s Saturday Shout Out topic.

We start with C. Eugene Steuerle, who says “History Provides A Lesson On Who Would Likely Pay For Trump’s Social Security Plan” in a post at TaxVox, the Tax Policy Center’s blog.

Spoiler alert: “Tomorrow’s taxpayers, mainly today’s non-elderly, will cough up the money. That’s not a promise; it’s just history,” writes Steuerle. He also recounts that history and how it impacts younger and older Americans today.

That’s not good news for younger workers, who already are more pessimistic about the Social Security program than their older counterparts, according to an article by Mark Miller.

Miller’s piece for the New York Times, “Social Security: Why It Matters for Young People, Not Just Retirees,” is today’s second Saturday Shout Out on the federal retirement program.

In addition to looking at the generational perspectives on Social Security and how they change as people age, Miller also reviews the political stances on how to save and boost the program.

Good COLA news: Finally, for the Social Security recipients bemoaning the 2.5 percent hike in 2025, the third shout this weekend goes out to Maurie Backman, who says “2025's Social Security COLA Has a Huge Silver Lining for Retirees.”

Backman’s article, original printed by The Motley Fool article and picked up by Yahoo Finance, points to the inflation connection.

Since Social Security cost-of-living adjustment (COLA) increases are tied to inflation, a smaller COLA bump indicates that living costs aren't rising as rapidly, note Backman.

“So yes, your benefits might only go up by 2.5% in the new year. But if the cost of things like groceries and gas increases at a slower pace than that, you could actually come out ahead,” he writes.

I’m not sure I will be able to convince my older relatives and friends of that, but since it’s the weekend, I like leaving on any positive note!

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