Current:Home > reviewsSocial Security's 2025 COLA estimate inches up but Medicare Part B premium may wipe it out -Capitatum
Social Security's 2025 COLA estimate inches up but Medicare Part B premium may wipe it out
Rekubit View
Date:2025-04-06 06:14:10
The latest estimate of Social Security's cost-of-living adjustment for 2025 rose to 3.2% after the government reported that April inflation was in line with economists' forecasts, new calculations showed Wednesday.
The 2025 COLA estimate has risen all year as inflation remains elevated and above the Federal Reserve's 2% target. It stood at 1.75% in January, 2.4% in February, and 3% in March.
Overall prices increased 3.4% from a year earlier, down from 3.5% in March, according to the Labor Department’s consumer price index, a gauge of goods and services costs throughout the economy. On a monthly basis, costs rose 0.3%, below the 0.4% rise the previous month.
COLA is based on the "consumer price index for urban wage earners and clerical workers," or CPI-W. That figure dipped to 3.4% from March's 3.5% but still outpaced the 3.2% COLA Social Security recipients began receiving in January. CPI-W excludes the spending patterns of retired and disabled adults, most of whom receive Medicare benefits.
"The higher inflation indicates that consumers are still experiencing an erosion in buying power," said Mary Johnson, a retired Social Security and Medicare policy analyst for the nonprofit Senior Citizens League, who still tracks the data.
Protect your assets: Best high-yield savings accounts of 2023
Items on which seniors spend the most money increased significantly over the past year: Hospital services rose 7.7%; transportation services soared 11.2%; shelter jumped 5.5%; and electricity climbed 5.1%, the government said.
Medicare wildcard
Expected Medicare Part B premiums for 2025 are likely to eat up most, if not all, of COLA's rise, Johnson said.
"Medicare’s Trustees estimate that the standard Part B premium for 2025 will increase at nearly double the rate of the COLA," she said.
In the Medicare Trustee report released last week, the Trustees estimated Part B premiums would climb by $10.30 a month in 2025 to $185.00. That's an increase of 5.9% from $174.70 in 2024.
COLA doesn't factor in Medicare Part B premium increases.
"Nevertheless, Part B premiums are one of the fastest growing costs in retirement, and those premiums are deducted directly from Social Security benefits," Johnson said.
How is COLA calculated?
The Social Security Administration bases its COLA each year on average annual increases in CPI-W from July through September.
The index for urban wage earners largely reflects the broad index the Labor Department releases each month, although it differs slightly.
What was 2024's COLA?
Older adults received a 3.2% bump in their Social Security checks at the beginning of the year to help recipients keep pace with inflation. That increased the average retiree benefit by $59 a month.
Seniors fall more behind
COLA is meant to help Social Security recipients avoid a lower standard of living, but it hasn't worked in reality. Poverty has increased among Americans 65 and older, to 14.1% in 2022 from 10.7% in 2021. That increase was the largest jump among any age group, according to the latest U.S. Census Bureau data.
And with Social Security’s reserves projected to run out in 2035, things may get worse.
"Congress is painting itself into a corner on fixing Social Security’s pending insolvency," Johnson said. "Failure to act on the program in time would lead to automatic benefit cuts. Without changes to reduce costs and/or raise revenues received by the program, the Social Security Trustees estimate that all benefits would be reduced by more than 20% to match the amount of tax revenues received by the program after 2035."
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
veryGood! (31)
Related
- Meet 11-year-old skateboarder Zheng Haohao, the youngest Olympian competing in Paris
- Charging bear attacks karate practitioner in Japan: I thought I should make my move or else I will be killed
- Mike Tyson explains why he's given up sex and marijuana before Jake Paul bout on July 20
- NFL draft takeaways: Cowboys passing on RB opens door to Ezekiel Elliott reunion
- Man charged with murder in death of beloved Detroit-area neurosurgeon
- Republicans seeking Georgia congressional seat debate limits on abortion and immigration
- Clayton MacRae: Global View of AI Technologies and the United States
- Bucks won't have Giannis Antetokounmpo, Damian Lillard for Game 4 vs. Pacers
- Pressure on a veteran and senator shows what’s next for those who oppose Trump
- Demonstrators breach barriers, clash at UCLA as campus protests multiply: Updates
Ranking
- Romantasy reigns on spicy BookTok: Recommendations from the internet’s favorite genre
- Clayton MacRae: Fed Rates Cut at least 3 more Times
- 2.9 magnitude earthquake rattles New Jersey
- CDC: ‘Vampire facials’ at an unlicensed spa in New Mexico led to HIV infections in three women
- Residents worried after ceiling cracks appear following reroofing works at Jalan Tenaga HDB blocks
- Suns' championship expectations thwarted in first round as Timberwolves finish sweep
- A second new nuclear reactor is completed in Georgia. The carbon-free power comes at a high price
- Candace Parker, a 3-time WNBA champion and 2-time Olympic gold medalist, announces retirement
Recommendation
North Carolina justices rule for restaurants in COVID
Off the Grid: Sally breaks down USA TODAY's daily crossword puzzle, Gotcha in the End
Transcript: Senate Minority Leader Mitch McConnell on Face the Nation, April 28, 2024
Thunder's Mark Daigneault wins NBA Coach of the Year after leading OKC to top seed in West
$1 Frostys: Wendy's celebrates end of summer with sweet deal
Sea off New England had one of its hottest years in 2023, part of a worldwide trend
Putin likely didn’t order death of Russian opposition leader Navalny, US official says
CDC says it’s identified 1st documented cases of HIV transmitted through cosmetic needles