Social Security’s 2025 COLA increase is expected to disappoint seniors

Retirees will likely get bad news on Thursday when the government announces the 2025 Social Security Cost of Living Adjustment (COLA).

Analysts have predicted a far lower COLA next year than in recent years, and retirees could face less financial stability as a result, experts say.

The latest estimate from the Senior Citizens League showed the COLA will likely be at a four-year low of 2.5 percent.

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“While inflation has cooled over the past year, many consumers are not noticing the difference in their wallets. Retirees in particular may still be struggling with the increased cost of living as their retirement savings keep pace with inflation,” Elizabeth Ayoola, a NerdWallet personal finance and retirement planning expert, shared Newsweek.

Many seniors will likely find 2.5 percent limited compared to the previous three years’ COLA, but it’s still a larger increase than average.

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“This is in keeping with our economic reality right now, as inflation finally appears to be cooling, which will impact the year-over-year benefits we see from government programs in the future,” says Alex Beene, a financial literacy lecturer for the University of Tennessee at Martin, tells Newsweek.

This year, seniors saw a 3.2 percent increase, while 2023 saw an 8.7 percent increase.

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“The annual COLA is intended to keep Social Security’s purchasing power stable even as inflation rises,” Ayoola said. “This increase may seem small to recipients compared to 2023, but it is not unexpected and is unlikely to have a major impact for most.”

However, Ayoola said inflation was not uniform and some food items such as eggs and other staples had increased more than the general inflation rate.

While any increase in benefits would be welcome, seniors will need to carefully budget what they receive, especially since many will see higher prices at the grocery store and for health care, Beene said.

“Just because inflation is cooling doesn’t necessarily mean that prices are going down, but rather that they’re no longer going up,” Beene said. “Seniors need to make the most of the benefits, even if they have a little more in the account next year.”

All told, seniors will likely earn $48 more each month, which hardly reflects the economic realities of many recipients.

“Sure, overall inflation is cooling, which sounds good on paper,” said Michael Ryan, financial expert and founder of michaelryanmoney.com Newsweek. “But here’s the problem, and I see this with people every day: the costs for seniors don’t follow the same pattern.”

For many, rent, medical bills and groceries are still skyrocketing, exceeding levels seen in previous years.

“I’ve been doing this long enough to know that Social Security should never be a person’s only income in retirement,” Ryan added. “But that’s exactly what has become for too many people.”