July Social Security payment increase – The extra money retirees will receive from the 2024 COLA

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Every month, many people receive an increase in their Social Security payments due to something called the cost of living adjustment (COLA). This adjustment is usually confirmed at the end of the year. Starting in January, retirees saw a 3.2% increase in their monthly Social Security payments to help them keep up with rising prices and cover their daily expenses. However, some seniors believe this isn’t enough because inflation has been high in recent years.

What is COLA?

COLA stands for cost of living adjustment. It is a percentage increase that affects everyone who receives Social Security. Each year, people get anxious around the time COLA is announced because it impacts their future Social Security payments. Retirees should know that COLA not only affects their finances but also impacts the national treasury and taxes. Understanding how Social Security is updated through COLA is important for knowing the economic impact for 2025.

How Does COLA Work?

COLA is a percentage increase that adjusts various values, usually based on Social Security Administration (SSA) rules. The main purpose of COLA is to help people keep up with inflation, which is the rise in prices over time. COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

The CPI-W tracks the prices of a fixed set of goods and services over time to understand how prices are changing. These prices are weighted based on the spending habits of families who earn at least half of their income from clerical or wage jobs. The CPI-W is calculated monthly and is used to determine COLA by averaging the CPI-W changes for the third quarter of each year (July, August, and September).

COLA Projections for 2025

The exact COLA percentage for 2025 will be decided in October. Analysts and politicians will meet to determine the COLA for the upcoming year. They look at monthly inflation rates to predict future trends. For example, in July 2022, inflation was at 9.1% due to the pandemic. Even though inflation has slowed down, it is still higher than pre-pandemic levels. In 2024, inflation increased from 3.1% in January to 3.5% in March but then dropped to 3.3% by May. This pattern could influence the COLA for 2025. According to the Senior Citizens League, the COLA for 2025 is expected to be between 2.57% and 3%.

Social Security Payments for Retirees in July

Based on the 3.2% COLA implemented at the beginning of this year, retirees will receive the following payments on July 3rd if they claimed benefits before May 1997:

  • Average payment: $1,900
  • Claim benefits at 62: $2,710
  • Claim benefits at 67: $3,822
  • Claim benefits at 70: $4,873

It’s important to note that not all retirees receive the same amount. Payments depend on factors like retirement age, work history, and contributions made. For more information about payment dates, refer to the Social Security payment schedule for this year.

How a 3% COLA Increase Affects Retirees’ Paychecks

If the COLA projections of 3% come true, retirees would see the following increases in their Social Security payments:

Retirement AgeSocial Security PaymentSocial Security Payment (Plus COLA 3%)
Average payment$1,900$1,957
Claim benefits at 62$2,710$2,791
Claim benefits at 67$3,822$3,937
Claim benefits at 70$4,873$5,019

FAQs About COLA and Social Security

Q1: What is COLA?

A1: COLA stands for cost of living adjustment. It helps Social Security payments keep up with inflation.

Q2: How is COLA determined?

A2: COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

Q3: When is the COLA percentage announced?

A3: The COLA percentage is announced in October each year.

Q4: How does COLA impact Social Security payments?

A4: COLA increases Social Security payments to help retirees keep up with rising prices.

Q5: What are the expected COLA percentages for 2025?

A5: The expected COLA percentages for 2025 are between 2.57% and 3%.

Understanding COLA is important for retirees because it directly impacts their Social Security payments. By keeping an eye on inflation trends and knowing how COLA is calculated, retirees can better plan their finances.

The expected COLA for 2025 is between 2.57% and 3%, which will help retirees cope with rising costs. Staying informed about these changes can help ensure financial stability in the years to come.

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