New inflation data surprises Wall Street – here’s what it means for Social Security uplifts for next year

The Social Security Administration has announced a 2.5 percent cost-of-living adjustment for 2025 for more than 72.5 million Americans.

The cost of living adjustment, or COLA, is the annual increase in monthly Social Security benefits that millions of seniors depend on.

The increase will increase the average benefit for retired workers by $48, to $1,968 per month.

The Social Security Administration confirmed the change in a post on social media site X, following the announcement of September inflation data.

Nonpartisan group The Senior Citizens League (TCSL) has called the COLA increase “disappointing,” following the announcement of a 2.5 percent increase in benefits.

The group said the measure by which the annual increase is calculated does not measure inflation as experienced by seniors.

TCSL CEO Shannon Benton said this year represents “another missed opportunity to give seniors the financial relief they deserve” by changing the COLA calculation that would “better reflect seniors’ changing expenses.”

He suggested instituting a minimum COLA of 3 percent.

“Our research shows that 67 percent of seniors rely on Social Security for more than half of their income and that 62 percent fear their retirement income won’t even cover essential needs like food and medical bills,” Benton added.

Nearly 68 million Social Security beneficiaries will see a 2.5 percent cost-of-living adjustment starting in January 2025, the Social Security Administration said in a statement.

Increased payments to nearly 7.5 million people who receive Supplemental Security Income (SSI) funds will also begin on December 31, 2024, he added.

“Social Security benefits and SSI payments will increase in 2025, helping tens of millions of people stay on top of their spending even as inflation has begun to cool,” said Commissioner Martin O’Malley. Social Security.

Some other adjustments that take effect in January of each year are based on increases in average wages.

Based on that increase, the maximum amount of earnings subject to Social Security tax is expected to increase from $168,600 to $176,100.

The Social Security COLA is the lowest annual increase since 2021, when beneficiaries received a 1.3 percent increase in benefits.

In 2024, there was a 3.2 percent increase and in 2023 there was an 8.7 percent increase.

The 2023 figure was the highest in four decades in response to record inflation.

In 2022, profits increased by 5.9 percent.

Now that the pace of inflation is slowing toward the Federal Reserve’s 2 percent goal, the COLA adjustment has moved closer to the historical norm.

Benefit growth has averaged about 2.6 percent over the past 20 years, according to the nonpartisan group Senior Citizens League.

Consumer prices rose 2.4 percent year over year in September, according to new data released Thursday by the Bureau of Labor Statistics.

This was higher than expectations, which were for an annual inflation rate of 2.3 percent.

But it was a slowdown from the 2.5 percent rate in August.

On a monthly basis, the consumer price index rose 0.2 percent through September, also above economists’ forecasts.

Much of the price increase was due to food and housing costs, the Labor Department said.