COLA 2025 Pay Raise is looking to be smaller for Social Security, Veterans Disability Compensation

The Social Security Cost-of-Living Adjustment (COLA) Forecast for 2025 Was Just Updated. There's Good News and Bad News for Retirees.

Key Points
The Senior Citizens League estimates that Social Security benefits will receive a 2.6% COLA next year, the smallest raise for retired workers since 2021.
Social Security benefits have reportedly lost 20% of their purchasing power since 2010, and benefits will lose more buying power next year if the COLA underestimates inflation.
Some experts believe COLAs should be based on CPI-E inflation rather than CPI-W inflation, but others believe the two figures average out over time.

Social Security's 2025 cost-of-living adjustment (COLA) is on pace to be the smallest raise for retired workers since 2021.

Social Security benefits get annual cost-of-living adjustments (COLAs) to help beneficiaries keep pace with rising prices across the economy. Inflation has moderated in recent months, and that trend is expected to continue, so The Senior Citizens League (TSCL) recently revised its 2025 COLA forecast downward, albeit modestly.

"The 2025 COLA prediction is about 2.57%, down from 2.63% last month," according to TSCL statistician Alex Moore. The good news is that COLAs are rounded to the nearest tenth of a percentage point, so both estimates imply payouts will increase by 2.6% in 2025. The bad news is that it would be the smallest raise for retired workers since 2021.

However, there is a more serious problem: TSCL estimates Social Security benefits have lost 20% of their purchasing power since 2010 because COLAs have consistently failed to keep pace with inflation. The accuracy of that figure is debatable, but other evidence supports the idea that benefits have lost purchasing power.

Two-thirds of seniors surveyed by TSCL this year said the 2024 COLA failed to cover the increase in their basic household expenses. Additionally, 26% of retired workers surveyed by the Employee Benefit Research Institute said they lacked confidence in their ability to finance retirement. That was the second-worst reading since 2015.

Unfortunately, Social Security's 2025 COLA may once again underestimate inflation, meaning benefits could lose more buying power next year.

Social Security benefits could lose buying power in 2025
Theoretically, annual cost-of-living adjustments (COLAs) protect the buying power of Social Security benefits by ensuring payouts increase at the same pace as inflation. The COLA applied to benefits in any given year is equivalent to the percent increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) during the third quarter of the previous year, meaning the three-month period between July and September. For that reason, the official 2025 COLA cannot be calculated until third-quarter CPI-W data is available in October.

The CPI-W is a subset of the Consumer Price Index that measures inflation based on the spending patterns of hourly workers. But that methodology makes little sense considering workers tend to be young people who spend money differently from retirees on Social Security. For instance, retired workers typically spend more on housing and medical care and less on education and transportation.

For that reason, several policy analysts and advocacy groups believe COLAs should be based on a different subset of the Consumer Price Index for the Elderly, or CPI-E. The CPI-E measures inflation based on the spending patterns of individuals aged 62 and older, which theoretically makes it a better gauge of how pricing pressures across the economy impact Social Security recipients.

"CPI-E better reflects the changes in prices that older adults face," according to Richard Johnson, director of the Program on Retirement Policy at the Urban Institute. Similarly, The Senior Citizens League and AARP (formerly the American Association of Retired Persons) have also expressed support for the CPI-E, as have numerous politicians. Indeed, over a dozen bills introduced in Congress during the last decade stipulated that COLAs should be based on the CPI-E.

Unfortunately, if the CPI-E is truly a better gauge of inflation for Social Security recipients, then benefits are on pace to lose buying power in 2025. I say that because CPI-E inflation has exceeded CPI-W inflation every month this year.

As shown above, CPI-E inflation outpaced CPI-W inflation by four-tenths of a percentage point through the first seven months of the year. If the CPI-E is the more accurate metric, then Social Security's 2025 COLA is on pace to be four-tenths of a percentage point too small. That means benefits will lose buying power next year, provided the trend persists through September, which marks the end of the third quarter.

[kyle]

What a slap in the faces of every veteran.

[JonyRotten]

I appreciate the raise right now, I can most certainly use it. I appreciate the VHA and the medical care, prescriptions, rides and service they provide as I need it. I appreciate the VBA for straightening out my benefits. I appreciate the DAV for giving me advise even if I don't take it. And I appreciate your videos.

[NoMoreLibs]

How's about VA COLA is below REAL brass don't get their bonuses. Can I get a 2nd?!

[zacelkins]

At the rate of inflation, they need to reward a 12-17% increase at the rate things are going 😅

[StevenGaetani]

I called out the director of the VA in Martinlsburg, WV about budget, she said they where only .01% over?? What is the number, I do not have that information handy???
This is the Medical side, when asked about hiring freeze? They are restructuring???? Veteran WV 82nd Airborne Division 🇺🇸🇺🇸🇺🇸

[Opinionated]

Brilliant! They never count the goods or services that people must purchase as part of the CPI. It's like a 80" flat screen TV that was 19k about 10 years ago that is now priced at 1k. That is what they will base your raise on...deflation. Forget about food, electric, repair costs, vehicle prices, home prices, insurance costs, etc. You know, the stuff you pretty much NEED to function, eat, work; they would not dare include real costs. How about your pay check...for those that are trying to make up the loss of income due to real inflation (printing of money)? Did it go up to compensate? This is why dependency on government handouts comes at a costs. They end up owning you and you're left with no recourse except to beg and be compliant. Freedom is the maximum absence of government coersion. Those days are gone. Do you feel free? They spent our Social Security that we paid into all of our adult working days, when they were supposed to invest it and give a good return on investment, now they just print funny money and pay us with it. You can only print so much funny money and expect it to hold value. I feel this entire system is on the verge of collapse and that is exactly what they want. They want to end the US Dollar. Might as well, because our ability to use a dollar is apparently based on our good looks and ability to wage war to make others accept it as an exchange for "protection". So yeah, I am full of piss-n-vinigar but our government no longer serves the people and protects the constitution. It serves itself and the public-private partnerships (AKA - facism) that gives it immunity to accountability. What am I going to do about it? Same as everyone else...not a damn thing except remain bewildered and hope for a quick and painless death when my time comes.

[user]

This shit is unbelievable they need to make a new system that would use actual inflation data instead of a 40 year old system food gas electric bills are out of control inflation is high ppl are making choices on what they can afford it really sucks the system is horrible

[dennisb]

Here is an idea, give us the same increase as congress gets. Hell we have done more for this country than the majority of them have.

[jenniferclever]

Shameful how can SSA recipients live off that when everything is twice what it was 3 yrs ago.

[frederickemmerick]

Wow 😮$3.24 !!! Almost enough to buy a gallon of gas ⛽️ in California 😲

[sixwheelcarlisle]

I wonder who they ask to come up with these income for veterans? I’ve never been asked how the less than 15% increase over the years keeps up with the over 50% increase in the cost of living in the same time frame.

[meathead]

VA is going to have a $15B shortfall, so don't expect a big pay raise. Ukraine, Israel, and the illegal immigrants got the money. You only served your country, went to several different wars, and spent countless months away from loved ones. Some even gave the ultimate sacrifice. I'm still trying to make it, make sense.

[rickybenton]

First! ❤ Love the channel and the updates!

[HobbitHomes]

The problem is that NONE of the CPI numbers represent what is actually going on out here the the real world. My monthly grocery spend has doubled since 2021. My rent has doubled since 2021.Gas is up 60%, propane is up 50%. Electric is up 35%. So, the cumulative CPI of 20% doesn't begin to cover the reality. At the current rates of COLA and inflation it will take me nearly 17 YEARS just to recover the buying power I had 4 years ago

[RobOlgatree]

SS reciepients have suffered along with Americas veterans. $2.41 a week for me . shameful

[brianharrington-wskj]

i find this ironic when we might not get paid oct 1

[rangerbull]

Let’s get this right, they waved a magic wand and give McDonald’s hamburger flippers 15 an hour and give seniors 2.6% wow

[Jacksonwest]

The corruption that runs through this administration is getting scarier. I feel for the disabilities who are not getting the help they deserve. Anyone who is not investing now is missing a tremendous opportunity. Imagine investing $2, 000 and receiving $10, 020.

[TheWhateverMan]

Should be higher since inflation is a bitch

[prof.kennethharrisonsr.]

The cost of being a veteran, you take it in and you take it out, this is why many vets walk like John Wayne.