The clock is still ticking, and the time is quickly approaching, so all beneficiaries may find out how much their monthly Social Security check will increase. There are fewer than two weeks until the last piece of the puzzle is in place to compute the percentage that will affect all Social Security programs.
You’ve probably heard in the news that there is rising anxiety about the Social Security Administration’s upcoming adjustments in 2025. We are all aware that the system has struggled to administer and pay its beneficiaries, with one of the causes being budget limits.
Indeed, the Old Age, Survivors, and Disability Insurance (OASDI) programs are based on a pyramid-like system that depends significantly on the number and contributions of the “base” to function.
However, demographic trends in all modern countries show that birth rates will not increase soon, putting more burden on the system as fewer new Americans enter the labor market and pay Social Security taxes.
As a result, pressure on the SSA administrator to discover new ways to create the cash flow required to fund each Social Security check would result in increased demands for a larger government budget, as well as indirect pressure on how present payments are modified over time.
To understand how this could happen, first understand how the current method works. Please continue reading.
How is the Social Security Check Increase Calculated?
Every Social Security payment is adjusted by a certain amount known as the COLA, or cost of living adjustment. As the name implies, this is the ratio used to determine increases in payments and other values regulated by the Social Security Administration.
The mechanism for computing the COLA, which modifies each Social Security payment for the following year, is also based on another index, the CPI-W, or Consumer Price Index for Urban Wage Earners and Clerical Workers.
In essence, the CPI-W is a collection of commodities and services that are tracked to see how their prices fluctuate over time. These values are then weighted according to the spending habits and priorities of families who earn at least half of their income from wages or salaries.
The Bureau of Labor Statistics (BLS) publishes the CPI-W each month, and for COLA purposes, the SSA averages the statistics for the third quarter of the year (July, August, and September) and compares them to the same figures from the previous year. This difference denotes the COLA for the next year.
This year, the BSL announced that the CPI-W will be accessible on October 10. As a result, the new COLA amount is expected to be published in the second or third week of October, with all Social Security payments changing in January 2025 as per lagradaonline.
Remember that the COLA rise will have an impact on other values controlled by the SSA, including the Supplemental Security Income monthly earnings and asset restrictions, the maximum Social Security payment at full retirement age (FRA), and the SSI student exclusion amount, among others.
What is the Projected Rise in the Social Security Check for This Year?
According to the Senior Citizens League (TSCL), the COLA for next year is likely to be about 2.5%, which is much lower than the 3.2% introduced in 2024.
This reflects the general notion that inflation will be lower in the United States economy. With this amount in mind, the average Social Security payout might increase by $48 every month, totaling $1,968.
Although this looks to be low, it is within the index’s 20-year average and has significant implications for each Social Security recipient: their purchasing power will be reduced compared to recent years, and the compounding effect of inflation will be less severe the next year.