WASHINGTON (AP) — Sherri Myers, an 82-year-old resident of Pensacola City, Florida, says the cost-of-living boost from Social Security she will receive in January “will have no impact on her meeting.” everyday expenses.
“Inflation has eaten up my savings,” she said. “I have nothing to fall back on – the cushion is gone.” So, despite the expected raise, she is looking for work to supplement her retirement income, which consists of a petite pension and her Social Security benefits.
About 70.6 million Social Security recipients are expected to see a smaller cost-of-living boost in 2025 than in recent years as inflation has moderated. The Social Security Administration makes the official COLA announcement on Thursday, and analysts previously predicted it would be 2.5% in 2025. Recipients received a 3.2% boost in their benefits in 2024, following a historically high benefit boost of 8.7% in 2023 caused by record inflation in 40 years.
The AARP estimates that a 2.5 percent COLA would boost the average benefit of a retiree receiving about $1,920 per month by $48 per month starting in January 2025.
“I think a lot of seniors will say this isn’t really enough to keep up with prices,” said Bill Sweeney, AARP’s senior vice president of government affairs.
The silver lining is that this is an indication that inflation is easing, he said.
The announcement comes at a time when the state’s Social Security system will face a significant financial deficit in the coming years.
The Social Security and Medicare Trustees’ annual report released in May said the program’s trust fund will no longer be able to pay full benefits beginning in 2035. When the trust fund is depleted, the government will only be able to pay 83% of planned benefits, the report said.
The program is funded by payroll taxes collected from employees and their employers. The maximum amount of income subject to Social Security payroll taxes was $168,600 in 2024, up from $160,200 in 2023. Analysts estimate the maximum amount will rise to $174,900 in 2025.
During the presidential campaign, Vice President Kamala Harris and former President Donald Trump put forward dueling plans to strengthen Social Security.
Harris says on her campaign website that she will protect Social Security by “making millionaires and billionaires pay their fair share of taxes.”
Trump promises that he will neither cut social programs nor change the retirement age. Trump also promises tax cuts for older Americans and posted on Truth Social in July: “SENIORS SHOULD NOT PAY SOCIAL SECURITY TAXES!”
AARP conducted interviews with Harris and Trump in slow August, asking how the candidates would protect the Social Security Trust Fund.
Harris said she would make up the deficit by “forcing billionaires and big corporations to pay their fair share of taxes and use that money to protect and strengthen Social Security over the long term.”
Trump said, “We’re going to protect it through growth.” I don’t want anything to do with aging. I won’t do that. As you know, I was there for four years and never thought about doing it. I’m not going to do anything to Social Security.”
Lawmakers have proposed various solutions to close the funding gap.
The Republican Study Committee’s fiscal year 2025 plan proposed reducing Social Security costs by raising the retirement age and reducing the annual COLA. Trump has not endorsed the plan.
Linda Benesch, a spokeswoman for Social Security Works, an advocacy group for the Social Security program, said: “We are concerned about this Republican Study Committee budget and the provisions within it that would reduce benefits for retirees.”
Social Security Works endorsed Harris for president in July, in part because of her decision as a California senator to co-sponsor a bill that would require the Social Security Administration to employ a different index to calculate cost of living increases: the CPI-E. It measures price changes based on older people’s spending habits, such as health care, food and medication costs.
The COLA is currently calculated using the Bureau of Labor Statistics’ Consumer Price Index (CPI).
