In a few weeks, retirees will start receiving their updated Social Security benefits for 2025, reflecting a modest 2.5% cost-of-living adjustment (COLA). While this raises the average monthly check to $1,976, many seniors feel it won’t be enough to keep up with rising expenses. A flaw in how these adjustments is calculated is expected to cost retirees about $120 next year, with some losing even more.
How Social Security COLAs Are Calculated
Each year, the Social Security Administration (SSA) adjusts benefits to account for inflation. This adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The SSA looks at the average CPI-W for July, August, and September of the current year and compares it to the same period from the previous year. The percentage increase determines the COLA.
For 2025, the CPI-W increased by 2.5% compared to 2024, so retirees will see a 2.5% bump in their checks. However, the CPI-W tracks the spending habits of urban workers, not retirees. Since retirees’ spending patterns differ—especially in areas like healthcare—the CPI-W may not accurately reflect their financial realities.
The Case for Using the CPI-E
Retirees are tracked by a separate index, the Consumer Price Index for the Elderly (CPI-E). This index considers spending patterns specific to adults aged 62 and older, focusing on areas like healthcare, which tend to consume a larger share of retirees’ budgets.
Switching to the CPI-E would result in larger COLAs for retirees in most years. The Senior Citizens League (TSCL) found that using the CPI-E instead of the CPI-W would have provided retirees with $2,689 more over the last decade.
For 2025, using the CPI-E would have increased the COLA to 3% instead of 2.5%. This would give retirees an extra $10 per month on average, or $120 over the year—enough to nearly cover anticipated Medicare Part B premium increases.
Will the COLA Calculation Change?
Currently, there are no plans to replace the CPI-W with the CPI-E, though some members of Congress have advocated for the change. A switch is more likely to happen as part of broader reforms aimed at addressing Social Security’s long-term funding challenges.
For now, retirees will need to explore other options to stretch their budgets. Personal savings, part-time work, or government benefits like Supplemental Security Income (SSI) may help fill the gaps left by Social Security checks.
How to Maximize Your Social Security Benefits
Many retirees overlook opportunities to boost their Social Security income. For example, delaying benefits can significantly increase your monthly checks. There are also lesser-known strategies that could add thousands to your yearly income. Exploring these options can help ensure a more comfortable retirement.
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Eliot Pierce is a dedicated writer for ChiefsFocus.com, covering local crime and finance news. With a keen eye for detail and a passion for storytelling, Eliot aims to provide his readers with clear and insightful analysis, helping them navigate the complexities of their financial lives while staying informed about important local events. His commitment to delivering accurate and engaging content makes him a valuable resource for the community.