The first problem is that in times such as this one, inflation can quickly overcome the COLA increase and render it useless. This happened in 2024 when the 3,2 per cent increase was surpassed by inflation in the first half of the year, and although it has cooled down some thanks to efforts from the Federal Reserve and the overall government, the problem is likely to repeat itself again in 2025.
It has been two months since the increase was announced, and prices for key commodities, including groceries, housing, and public transportation, have continued to rise.
The second problem is that the index used to calculate the COLA is geared towards young urban professionals, not the elderly, disabled or disadvantaged population, who usually spend more on housing and medical costs (some of the most rapidly rising costs overall) than any other category of people.
There is another index that some advocates have discussed would be more appropriate for the situation of these individuals, and that is the CPI-E, which has the same categories as the CPI-W but gives more weight to housing and medical costs to calculate the increase. This index is almost always higher than the CPI-W, which means that, if used, it would consistently give beneficiaries a higher increase in benefits.
Another problem with how the system is structured is that, since beneficiaries are what is considered on fixed income and the increase always comes after the expenses have risen, there is no way for them to not actually lose purchasing power over time.
Many have to consistently dip into their savings to make ends meet or rely on other benefits (such as the Supplemental Nutrition Assistance Program or SNAP) to be able to survive. This means that they can never recoup savings as Social Security is not meant to do that, and they can never receive an increase large enough to cover all their costs.
For those who have healthy savings and investments, this can be salvaged, but those who live paycheck to paycheck need more government help to have an acceptable standard of living, which would not be as big of a problem if the increase was more adequate to their needs.
What Other Benefits Are Available That Also Rely On The COLA?
The SNAP program is also a benefit that most people on Social Security qualify for, and it also gets yearly increases corresponding with the COLA. The National Council on Aging found that three-fifths of eligible seniors were not taking advantage of benefits they would be eligible for and encouraged many struggling to make ends meet to apply.
After the increase, those eligible could get $292 for a household of one and $536 when two people live in the home.
