Social Security beneficiaries will get a 2.5% raise in 2025. That’s the lowest hike since 2021, according to the Social Security Administration.
It’s also a number that has been criticized by consumer advocates, who say it’s insufficient after several years of steep inflation. One of those critics is Shannon Benton, the executive director of the Senior Citizens League, who thinks the administration should be making cost-of-living adjustments based on a different inflation index, one geared to the spending of seniors.
“This year represents another lost opportunity to grant seniors the financial relief they deserve by changing the COLA calculation,” says Benton. She says specifically that Social Security should be changing its calculations from those based on the Consumer Price Index for Urban Wage Earners (CPI-W) to ones based on the CPI-E, an index that uses seniors’ spending patterns to gauge inflation.
The urban wage version came in at 2.2% for September, the Bureau of Labor Statistics announced in mid-October.
Recipients this year received a 3.2% cost-of-living increase, much lower than the 5.9% hike in 2023 and the 8.7% increase in 2022, which were the biggest increases in four decades.
On average, retired workers’ Social Security checks will increase by an estimated $48 to $1,968 on January 1, according to the Senior Citizens League, an Alexandria, Va.-based seniors advocacy group.
The group, in a statement, said it had anticipated the cooling of inflation and a disappointing COLA since the beginning of the year, noting that it had predicted the 2.5% increase long before the Social Security Administration’s mid-October announcement.
Benton says the league’s research shows that 67% of seniors depend on Social Security for more than half their income, while 62% worry that their retirement income will not be enough to cover essentials like groceries and medical bills.
She adds that the league and seniors are demanding that Congress take immediate actions to strengthen the cost-of-living adjustment “to ensure Americans can retire with dignity.” Such actions would include “instituting a minimum COLA of 3% and changing the COLA calculation from the CPI-W to the CPI-E,” Benton says.
The AARP said the COLA hike will bring seniors some relief, but many will still struggle with elevated consumer prices.
“Inflation took a financial toll this past year, particularly on retirees, who often rely on Social Security as a key source of income,” the AARP’s chief executive officer, Jo Ann Jenkins, said in a prepared statement. “Even with this adjustment, we know many older Americans who rely on Social Security may find it hard to pay their bills. Social Security is the primary source of income for 40% of older Americans.”
Both the Senior Citizens League and AARP, as well as other advocacy groups and labor organizations, have long supported using a consumer price index that more closely represents the price changes experienced by retirees. The CPI-E, they argue, is a better reflection of that, as it’s been growing more quickly in most years than the CPI-W, which does not accurately reflect the spending patterns of retired households.
Retires, they note, tend to spend more on healthcare and housing costs and less on gasoline and energy prices. Energy costs currently have more influence in the cost-of-living adjustments that the Social Security Administration uses because energy is weighted more heavily in the CPI-W.