Analyst Predicts Potential Increase in Social Security Checks by 2025

Analyst Predicts Potential Increase in Social Security Checks by 2025

Retired Americans may be in for a pleasant surprise next year as a policy group predicts a higher-than-anticipated increase in their Social Security payments. The Senior Citizens League, a nonpartisan group representing retired individuals, forecasts a cost-of-living adjustment (COLA) of 2.4 percent for monthly payments starting in 2025. This is an increase from their previous forecast and is attributed to higher-than-expected inflation.

Mary Johnson, a policy analyst with the Senior Citizens League, cautions that this prediction is preliminary and subject to change. The COLA is based on average inflation in the third quarter of the previous year against the previous year’s inflation. Johnson emphasizes that a lot can happen between now and then, so it’s important not to get too carried away with expectations.

The Department of Labor’s monthly report reveals that the consumer price index (CPI) rose 0.4 percent in February, following a 0.3 percent increase in January. Shelter costs, including rents, also rose by 0.4 percent. Gasoline prices experienced a significant increase of 3.8 percent after a decline in January.

Looking at the data from the past 12 months, the CPI increased by 3.2 percent, indicating rising inflation. Johnson highlights that shelter, medical, and transportation prices remain higher than the overall inflation rate, making it challenging for seniors and retired individuals to keep up with these costs.

The Senior Citizens League had previously projected a 1.75 percent increase in Social Security checks for 2025 based on January’s CPI data. However, Johnson believes that inflation rates will be lower in 2024 and expects a corresponding decrease in the COLA for 2025.

It’s crucial for people to stay informed about potential changes to Social Security as they directly impact individuals’ financial well-being. Changes in COLA and inflation rates can significantly affect retirees’ pocketbooks, making it essential to understand how these adjustments may impact their financial situations.

In 2024, Social Security payments saw a COLA increase of 3.2 percent based on inflation numbers from July, August, and September 2023. This increase followed a significant 8.7 percent COLA implemented in 2023 due to exceptionally high inflation in 2022.

However, if the adjustment for Social Security checks decreases in 2025 compared to 2024, it may not necessarily be good news for seniors. If housing, hospital care, auto insurance, and other costs remain at today’s elevated levels, some seniors may be required to pay taxes on their Social Security benefits from the previous year. This is due to fixed-income thresholds that have never been adjusted for inflation since the tax was implemented in 1984.

Inflation concerns have been growing, particularly as January saw a pickup in inflation rates. Economists attribute this to price hikes by service providers at the beginning of the year, which were not fully accounted for in the government’s seasonal fluctuation model. Additionally, owners’ equivalent rent, a measure of the amount homeowners would pay to rent their property, diverged from actual rents.

While there was no change in healthcare costs in February, hospital services prices decreased by 0.6 percent, while dental services increased by 0.4 percent. Airline fares saw a significant jump of 3.6 percent, and motor vehicle insurance costs rose by 0.9 percent.

In summary, retired Americans may have something to look forward to next year with the potential increase in Social Security checks. However, it’s important to approach this prediction with caution as it is subject to change. Rising inflation rates and elevated costs in housing, healthcare, and transportation continue to put pressure on seniors’ finances. Staying informed about potential changes to Social Security is crucial for retirees to navigate their financial situations effectively.