A significant portion of the income that millions of people in the United States get comes from Social Security, particularly those who are senior citizens.
In point of fact, polls conducted by Gallup have shown that between 80 and 90 percent of retirees rely on this program as a significant or at the very least supplementary source of income source.
Moreover, here is something that is of the utmost importance: the Cost of Living Adjustment, also referred to as COLA, which stipulates the amount by which payments will increase on a yearly basis.
In order to account for the effects of inflation on benefits, the Social Security Administration (SSA) makes use of a technique known as the Cost of Living Adjustment (COLA).
The concept is straightforward: if the costs of goods and services that older individuals often purchase go up, the cost-of-living adjustment (COLA) will boost the benefits so that they do not lose their ability to make purchases.
What is the cost-of-living adjustment (COLA), and why does it have such a significant impact on Social Security?
Since 1975, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) has been used as the basis for calculating the cost of living adjustment (COLA).
Inflation is measured by this index, which takes into consideration more than 200 different types of spending. In spite of this, the calculation of the benefit increase is limited to the data collected during the third quarter of each year, which spans from July to September.
When the Consumer Price Index for Women for the third quarter is higher than it was for the same period the previous year, the benefits will increase by the same amount, rounded up to the closest tenth.
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What is the typical amount of money that will be given to beneficiaries?
Let’s put some numbers on the table so that we can get a better understanding of the impact of COLA. In November of 2024, the average amount of a Social Security payment was $1,788.12, as reported by the Social Security Administration (SSA).
This amount will increase to $1,834.79 per month in 2025 as a result of the 2.5% increase in the cost of living adjustment. This is an increase of around $44.75 per month, which is equivalent to slightly over $22,000 yearly.
Be careful, however, that not all beneficiaries will receive the same amount of money. It is important to note that retirees, persons with impairments, and survivors of workers who have passed away are all marked by substantial differences:
- Retirees make up 75.6% of the beneficiaries in this category. Through the year 2025, the average check that retirees receive will climb by $49, reaching $1,976 per month, which is equivalent to around $23,712 per year.
- The monthly payments of about 7.24 million persons who fall into this category will increase by $38 to reach $1,580. This increase will be implemented for those who have disabilities.
- In addition, the 5.8 million survivors will receive a boost of $38 on average, which will bring their anticipated monthly benefit to $1,551 in total.
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In what ways does this affect those who are affected?
However, despite the fact that the increase might appear to be insignificant, particularly in light of the fact that inflation is on the rise, every dollar matters for those individuals who rely on Social Security to meet essential needs such as housing, food, and medication.
The cost-of-living adjustment (COLA) ensures that recipients do not lose ground in the face of growing expenditures.
Nevertheless, the difficulty lies in making the most of these advantages. There are several ways that are not widely known that could assist you in obtaining additional benefits from Social Security in the future.
You may be surprised to learn that by making the appropriate modifications, you have the potential to raise your annual income by thousands of dollars. To get the most out of this important assistance, it is worthwhile to investigate how to do so.