Social Security Cola 2025 What Retirees and Veterans Need to Know About the Smallest Raise

 

Introduction

Hey, thanks for making it to Veterans Infotap! I'm glad you made it. There is another projection put out by The Motley Fool for the Cost of Living Adjustment (COLA) that might impact your pay increase. Remember, we are more than halfway through the three-month period in which the Social Security Administration looks at to calculate COLA.

Two Different COLAs

There are two different COLAs that the VA implements:

1. Social Security Administration's COLA:
   • Congress authorizes the VA to mirror the Social Security COLA each year. This COLA affects your VA compensation pension, dependency and indemnity compensation, and other related benefits.
2. VA-Implemented COLA:
• The VA calculates this COLA independently, and it affects benefits such as educational benefits, employment benefits (e.g., Veterans Readiness and Employment), and Chapter 35 education benefits. The last adjustment was 6.2%, which goes into effect on October 1st.

Social Security COLA Forecast for 2025

Update: The Senior Citizens League estimates a 2.6% COLA for Social Security benefits in 2025. This would be the smallest raise for retirees since 2021.

Purchasing Power: Social Security benefits have reportedly lost 20% of their purchasing power since 2010 due to COLA failing to keep pace with inflation.

Potential Issues: Benefits could lose more buying power next year if COLA underestimates inflation.

Key Points

COLA Calculation:

• The Social Security 2025 COLA forecast is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the previous year.
• Some experts suggest using the Consumer Price Index for the Elderly (CPI-E) for a more accurate measure of inflation affecting retirees.

Discrepancy Between CPI-W and CPI-E:

• CPI-E has shown higher inflation rates compared to CPI-W. This difference could lead to Social Security benefits losing buying power if the trend persists.

Legislative and Policy Considerations

Legislation: Over a dozen bills have been introduced in Congress suggesting that COLA should be based on CPI-E instead of CPI-W.

Current Legislation: If CPI-E is indeed a better gauge, Social Security and VA benefits might see improved adjustments in the future.

Conclusion

Future Adjustments: Benefits may lose buying power if the discrepancy between CPI-W and CPI-E continues.

Call to Action: If you feel that CPI-E should be used for COLA calculations, consider reaching out to your Congressional representatives.

Outro

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