In just a few weeks, millions of retirees will get their first Social Security checks with the 2025 cost-of-living adjustment (COLA) applied. While many were hoping for a more significant increase to help offset rising living costs, they will receive a meager 2.5% boost—much lower than what they expected after the staggering 8.7% COLA in 2023. But the real kicker? The government’s flawed method for calculating these increases could be costing retirees up to $120 next year.
The Government’s Calculation Method: A Critical Flaw
The Social Security Administration (SSA) uses the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to determine COLAs. This metric tracks inflation based on the spending patterns of households where at least one person works. This might seem logical at first—except for one crucial detail: retirees aren’t counted in this calculation. They are excluded entirely, despite having far different spending habits, especially when it comes to healthcare.
So, instead of using the CPI-E, which tracks inflation for seniors, the SSA relies on a formula that doesn’t reflect the reality retirees face. The CPI-E measures the higher healthcare expenses that older adults typically incur. Yet, seniors are stuck with a calculation that ignores these crucial costs.
Retirees Losing Out—Again
The fallout of this flawed calculation is not just hypothetical. According to the Senior Citizens League (TSCL), using the CPI-E instead of the CPI-W would have resulted in larger COLAs for retirees in seven out of the last ten years. Had this adjustment been made, seniors would have pocketed an additional $2,689 over that decade.
In fact, if the government had used the CPI-E for the 2025 COLA, retirees would be seeing a 3% increase instead of just 2.5%, which would have meant an extra $120 in their pockets for the year.
That may not seem like much, but consider this: it could cover the increase in Medicare Part B premiums that will likely be deducted from Social Security payments, further reducing retirees’ purchasing power. The government’s decision to stick with an outdated and irrelevant metric is literally costing retirees money that could make the difference in their financial stability.
Why Won’t Congress Fix This?
It’s not that lawmakers don’t know about this issue. There have been calls from some members of Congress to switch to the CPI-E, but the proposal has failed to gain any real momentum. Why? The truth is, Social Security’s funding issues and political gridlock mean that fixing this problem is not a priority. If lawmakers ever do tackle this issue, it will likely be part of a larger overhaul of the Social Security system—something many seniors fear could involve even more cuts to their benefits.
What Can Retirees Do?
With no immediate change in sight, retirees will have to find other ways to make up for the shortfall in their Social Security checks. Whether it’s dipping into savings, taking on part-time work, or applying for additional benefits like Supplemental Security Income (SSI), seniors are left to fend for themselves in a system that fails to reflect their needs. And if the 2025 COLA is any indication, it’s only going to get worse from here.
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