Social Security Recipients to See 2.5% Increase in Benefits for 2025

On October 10, 2024, the Social Security Administration (SSA) announced a 2.5% increase in benefits for over 72.5 million recipients starting in 2025.

The method for calculating the annual cost-of-living adjustment (COLA) has remained unchanged since 1975. Nonetheless, various political figures have proposed revisions to this calculation process, including Democratic presidential nominee Kamala Harris. Here’s a look at alternative calculations and their potential impacts on 2025 Social Security COLA.

Vice President Kamala Harris. Image source: Official White House photo by Lawrence Jackson.

Kamala Harris’s Support for COLA Calculation Changes

Before assuming the vice presidency, Harris served as a U.S. senator from California. In 2019, she co-sponsored the Social Security Expansion Act proposed by Senator Bernie Sanders of Vermont.

This legislation sought to implement several significant reforms in Social Security, including a revision of the COLA calculation method. For almost half a century, the calculation has relied on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The Social Security Expansion Act proposed switching from the CPI-W to the Consumer Price Index for Elderly Consumers (CPI-E).

The change in inflation metrics aims to better reflect the costs faced by senior citizens, as the CPI-W has been criticized for not capturing these expenses accurately. The CPI-E, which is now referred to as the R-CPI-E (with the “R” denoting “research”), was designed to address this concern.

When Joe Biden selected Harris as his running mate during his 2020 campaign, he also included the proposed switch to CPI-E in his platform for reforming Social Security.

Projected COLA Using the CPI-E for 2025

The Senior Citizens League, a nonprofit that advocates for seniors, has been calling on Congress to amend the COLA calculation to utilize the CPI-E. The rationale behind this is that such a shift could lead to increased benefits for retirees.

A recent study by the Congressional Research Service (CRS) indicated that transitioning to the R-CPI-E would likely yield larger COLAs and higher Social Security payments. The CRS projected that this change would have resulted in equal or higher COLAs in nearly all years since 1986, except for six.

Specifically, if the R-CPI-E was used for the 2025 calculation, the COLA would rise to 3% instead of the projected 2.5%. For example, the average retired worker’s monthly Social Security benefit in August 2024 was $1,920.48. Under the 2.5% adjustment, this would amount to a monthly increase of $48.01. In contrast, a 3% adjustment would result in an increase of $57.61—a difference that totals $115 over the course of a year, which could be significant for many retirees.

Future Implications if Harris Becomes President

While Harris has advocated for changing the COLA calculation as a senator and vice president, her current presidential proposals do not specifically address this issue. If elected, her support for the CPI-E might rely on whether Democrats secure control of both the House of Representatives and the Senate.

Regardless of political outcomes, adjustments to the COLA calculation could emerge in the future. With Social Security trust funds projected to deplete by 2035, substantial reforms will be critical to avoid considerable benefit reductions.

The political negotiations surrounding the program’s financial sustainability might include discussions for enhancements, with a switch from CPI-W to CPI-E likely being a key consideration.

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