Social Security COLA 2025 Increase Sparks Backlash
Senior groups reacted to the cost-of-living (COLA) adjustment announced on Thursday for 2025 Social Security payment, saying it likely will not cover higher costs retirees are facing.
The COLA was set at 2.5 percent, meaning retired workers' Social Security checks will grow by around $48 a month, going from an average of $1,920 to $1,968.
It was a significantly lower increase compared to previous years and campaigners branded it a "lost opportunity" and called for "serious reform," pointing to inflation on everything from groceries to health care meaning many seniors may feel a financial strain.
The COLA is calculated by averaging third-quarter inflation as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a measure of the average change in prices paid for a basket of goods and services purchased by urban workers.
But advocates for seniors told Newsweek it would be better calculated in relation to the Consumer Price Index for Elderly Consumers (CPI-E), based on changes in prices for goods and services that older people spend their money on.
Shannon Benton, executive director of The Senior Citizens League, said in a statement: "This year represents another lost opportunity to grant seniors the financial relief they deserve by changing the COLA calculation from the CPI-W to the CPI-E, which would better reflect seniors' changing expenses.
"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 and changing the COLA calculation from the CPI-W to the CPI-E."
The lower payment increase—the smallest annual hike since 2021—arrived as inflation cooled in the third quarter.
The Senior Citizens League said it had expected the cooling inflation and a "disappointing" COLA since the beginning of the year. Its last prediction before the announcement correctly put the COLA at 2.5 percent.
"Our research shows that 67 percent of seniors depend on Social Security for more than half their income and that 62 percent worry their retirement income won't even cover essentials like groceries and medical bills," Benton said.
A survey of seniors found 72 percent were in favor of changing the COLA calculation to an index that better reflected their changing costs, the league said. And 70 percent of retirees said they worried that high inflation prices would cause them to raise their spending and potentially deplete their retirement savings.
Some political leaders have come out against the new COLA as well, arguing that it does little to support seniors during their golden years. There has also been a push to raise benefits so that seniors can retain more purchasing power. The proposed Social Security 2100 bill would make more than 13 provisions to increase Social Security benefits, albeit many for a temporary period of five years.
"The annual COLA is vital for Social Security beneficiaries to make ends meet, but 2.5% is not nearly enough for seniors living on fixed incomes," Congressman John Larson (Connecticut) wrote on X, formerly Twitter. "Democrats have a plan to enhance benefits & improve the COLA to accurately reflect seniors' expenses. Let's pass Social Security 2100!"
Despite criticism of the new COLA boost, Drew Powers, the founder of Illinois-based Powers Financial Group, said it was in line with expectations and CPI data.
"This increase is smaller than the past three years, but it is slightly above the most recent 20-year average," Powers told Newsweek. "The problem has always been that the CPI-U [Consumer Price Index for All Urban Consumers] and CPI-W have never been the ideal measure of senior citizen spending. When the COLA figure doesn't match reality, our senior citizens suffer."
Michael Ryan, a finance expert and the founder of michaelryanmoney.com, agreed that official inflation numbers often masked the true financial pressure on older Americans.
"Just last week, I sat with Martha, a 72-year-old friend who broke down her monthly expenses," Ryan told Newsweek. "Her prescription costs jumped 12 percent this year, while her assisted living facility raised rates by 8 percent. These are the real-world increases that a 2.5 percent COLA simply can't cover."
When health care costs are surging by at least $200, and housing prices are rising by 8 percent in many markets with grocery inflation remaining above 3 percent, that $50 increase does little to keep seniors afloat, Ryan said.
"The inadequacy of the current COLA system isn't just about numbers. As someone who's worked with retirees for decades, I believe we need serious reform," Ryan said. "The CPI-E (Elder Price Index) would better reflect seniors' actual expenses, though it would require careful implementation to maintain program sustainability."