In just a few weeks, retirees will get their first Social safety benefits with the 2025 expense-of-living adjustment (COLA) included. This will raise the average check to $1,976 per month. It’s less than what many were hoping for, especially after three years of above-average COLAs, including a whopping 8.7% boost for 2023.

Many debate the 2.5% bump will be insufficient to cover the rising costs seniors will face in 2025, and an odd quirk of the Social safety advantage calculation may be to blame. It’s estimated to expense the average retiree $120 next year, and some could miss out on even more.

How the government calculates COLAs

The Social safety Administration (SSA) issues COLAs in most years to assist Social safety benefits keep up with worth rise. The SSA measures that worth rise using the changes in the third-quarter averages of the buyer worth Index for Urban Wage Earners and Clerical Workers (CPI-W) from one year to the next.

Essentially, the government looks at the CPI-W numbers for July, August, and September of the current year, adds them up, and divides them by three to get the third-quarter average. Then, it compares this to the average of the same months in the previous year. The difference is the COLA. The 2024 average was 2.5% higher than the 2023 average, so retirees get a 2.5% COLA for 2025.

It seems logical, until you discover that the CPI-W focuses on the spending habits of households in urban areas where at least one member was employed for at least 37 weeks out of the year, or where at least 50% of household returns comes from wages associated with an eligible occupation. That means retirees without jobs aren’t included.

They’re actually tracked by a divide index known as the buyer worth Index for the Elderly (CPI-E). This focuses specifically on the spending habits of those 62 and older, which are often different from their younger counterparts. For example, older adults often have to spend more on medical worry than younger adults, but they may spend less in other areas.

2025 Social safety COLA:Your top 5 questions, answered

How the COLA calculation shortchanges retirees

Many debate the government should use the CPI-E to compute Social safety COLAs instead of the CPI-W because the CPI-E better reflects retiree spending habits. Doing this would also outcome in larger COLAs in most years.

The elder Citizens League (TSCL), a nonpartisan elder throng, found that using the CPI-E instead of the CPI-W would’ve resulted in higher COLAs in seven of the 10 years between 2014 and 2024. Had this transformation been in result, retirees would’ve taken home an additional $2,689 over that decade.

Retirees will run into the same issue in 2025. Had the government used the CPI-E to determine the COLA, seniors would be getting a 3% boost to their checks next year instead of 2.5%. That would’ve increased the average monthly advantage by another $10.

It might not seem like much, but that would provide the average retiree an extra $120 to spend in 2025 — nearly enough to pay the Medicare Part B additional expense boost that will likely arrive out of your Social safety checks automatically if you’re enrolled in both.

Will the COLA calculation ever transformation?

There aren’t currently any plans to alter the COLA calculation so it uses the CPI-E instead of the CPI-W, but that doesn’t cruel it’ll never happen. Some members of Congress back this proposal, but the concept hasn’t managed to boost traction yet. If it happens, it’s likely to occur as part of broader reforms intended to fix Social safety’s impending shortfall.

In the meantime, retirees will have to supplement their Social safety checks with personal reserves or returns from a job to cover what their benefits don’t. You could also check to view if you’re eligible for other government benefits, like Supplemental safety returns (SSI), to assist make ends meet.

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