Could a COLA Calculation Change Boost Social Security Payments in 2025?

In less than half a year, the 2025 Social Security Cost-of-Living Adjustment (COLA) will be announced.

Seniors and Social Security advocates talk a lot about what the COLA will be. But what about how it’s calculated? Rethinking this aspect of the number could make next year’s payments higher in line with where they should be.

As we’ve discussed, Social Security should be treated like a trust. But to restore it, policymakers must understand the financial needs of seniors. A new proposed policy would see the Consumer Price Index for the Elderly (CPI-E) used in the COLA calculation, if this number is higher than the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

Understanding the Proposed Change to COLA Calculation

Using the Consumer Price Index for the Elderly (CPI-E) to calculate the COLA could significantly benefit seniors. The CPI-E specifically reflects the spending patterns of older adults, focusing on items like healthcare and housing, which comprise a larger portion of seniors’ expenses. By using this index, adjustments to Social Security benefits would more accurately reflect the real-life cost increases faced by the elderly. This means seniors could maintain their standard of living as prices rise.

Adopting the CPI-E would acknowledge the unique financial challenges seniors encounter. Healthcare costs, for instance, tend to rise faster than other expenses and have a disproportionate impact on retirees.

By factoring in these specific expenses, the COLA adjustments would better address seniors’ needs, helping them afford essential services without sacrificing other necessities. This could alleviate financial stress for many retirees. It would ensure they can cover their expenses and maintain a decent quality of life throughout retirement.

What do you think of this proposed change to the COLA calculation method? Does it have a chance of passing? If it does, will it raise Social Security payments? Share your thoughts in the comments. For more content like this, follow us on Facebook and Twitter.