The Social Security Administration announced the cost-of-living adjustment (COLA) for next year and set the number at 2.5%, the lowest adjustment since 2021. This means on average, retirees will see a monthly increase of just $49 per month, which does not stretch far after when consumer goods are still at elevated prices.
67% of seniors depend on Social Security for more than half their income, an average of $49 a month is eaten away health care and home and auto insurance costs. Auto insurance alone is up 14% this past year. Even staples like eggs are up close to 40% year-over-year.
Further frustration comes from the uncertainty surrounding Medicare Part B premiums, which may reduce the effective benefit of the COLA even further. AARP and other groups continue to call for reform to ensure that Social Security remains a reliable income source for retirees.
Consumer price index summary
| Basket of goods | Un-adjusted 12-mos. ended sept. 2024 percentage change |
| All Items | 2.4% |
| Food | 2.3% |
| -Food at home | 1.3% |
| -Food away from home | 3.9% |
| Energy | -6.8% |
| -Energy commodities | -15.3% |
| -Fuel oil | -22.4% |
| -Energy services | 3.4% |
| -Electricity | 3.7% |
| -Utility (piped) gas service | 2.0% |
| All items less food and energy | 3.3% |
| -Commodities less food and energy commodities | -1.0% |
| -New vehicle | -1.3% |
| -Used cars and trucks | -5.1% |
| -Apparel | 1.8% |
| -Medical Care commodities | 1.6% |
| Services less energy services | 4.7% |
| -Shelter | 4.9% |
| -Transportation services | 8.5% |
| -Medical care services | 3.6% |
Data: bls.gov
While 2.5% COLA may seem disappointing to seniors after higher increases the past few years, its not all that bad. The small COLA is a reflection of the entire inflation picture in the U.S., where essentials like energy, fuel oil dropped 15% and 22% respectively over the last year. After the craze of 2021, used car sales have also cooled off with prices dropping just over 5%.
Cost-of-living adjustments are designed to maintain purchasing power, not improve ones finance outlook. A smaller COLA feels underwhelming but it is a reflection of a more stable with stable inflation which should keep consumer needs prices in check.
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