It makes no difference whether you are now receiving a Social Security payment or intend to be one of the SSA’s future recipients. It is usually a good idea to understand as much as possible about how the economy will affect your benefits and how much they are likely to grow each year.
This may appear to be a hard procedure, but once you understand the broad framework, you can begin to plan your future income.
Why is It Necessary to Boost Your Social Security Check?
There is a truth that you have always known, but as a Social Security beneficiary, you may be more conscious of it now. It refers to an increase in the price of all products and services that you consume.
In general, if you are in employment, this is less visible because you will receive a raise or be able to shift jobs to earn higher pay.
As a result, the impact is mitigated by the rise in your income minus the increase in prices. However, if you are retired and your sole source of income is your monthly benefits, your alternatives may be more limited, and it will be clear how much the price change would affect your ability to maintain your current way of living.
COLA, or cost-of-living adjustment, was introduced as a countermeasure in 1975. Previously, any changes to Social Security check amounts required special congressional authorization; in the future, modifications would be made regularly and in response to economic inflation. This ensures that the benefits you get from your Social Security check stay up with inflation, implying that your buying power will remain consistent during your tenure as an SSA recipient.
How is the Increase in Your Social Security Check Calculated?
The calculated COLA determines the yearly increase in your Social Security income. More generally, the approach is based on the average of another index known as the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers). It would be preferable to start with that term.
CPI-W is a subset of a price index, which is an econometric instrument that assesses how prices change over time and delivers a percentage of that change. CPI-W tracks over 200 goods and services. It is, however, weighted, which means that not all price increases will have the same influence on the index; the goods having the largest impact are determined by the consumption habits of households whose wage earners or clerical workers earn 50% or more of their income.
To compute the COLA, the Social Security Administration averages the CPI-W for the third quarter of the year (July, August, and September) and then calculates the percentage change from the previous year’s figure. Following this approach, the cost of living adjustment is used to alter not just the amount of your Social Security payment, but also other monetary values maintained by the SSA.
How Much Should You Anticipate From Your Social Security Check?
Your Social Security check amount is determined by a variety of criteria, including your full retirement age, employment history, contributions made, and kind of disability, particularly for those who qualify for Social Security Disability Insurance (SSDI) benefits. After 2020, the COVID-19 pandemic’s effects on the global economy resulted in skyrocketing inflation.
This trend is progressively altering. The Senior Citizens League, a non-profit that targets senior concerns, has estimated a 2.6% COLA for 2025. The expected date of this increase is January 2025.