Tough times lie ahead as we get closer to knowing when your Social security audits will rise in 2025. Many of us probably won’t be happy about this increase. However, it’s important to understand why this is happening and how you can make the most of the situation. The Social Security Administration, or SSA if you will, oversees all of the various programs that make up a broad portfolio that tries to help Americans avoid poverty as much as possible. Given that all of this support is provided in the form of monthly benefits, it’s not unreasonable to expect them to be high enough to cover basic needs and still leave some money left over for additional necessities.
It is plausible to conclude that the mission of the program is lost if this is not the case. Therefore, adjusting the amounts provided to all beneficiaries is not only part of the SSA’s mission, but also a crucial part of the program’s objectives of adjusting values to economic changes. This includes taking into account Inflation statistics and developing a mechanism to track the trend and apply it to Social Security checks.
How is the increase in your Social Security checks determined?
Conceptually, you would have to choose an inflation indicator. In this scenario, the SSA has created an index called COLA, or Adjustment to the cost of living. The calculation process involves comparing the different values of a price index over time to determine the likely trend of inflation. The basic information used to update your Social Security checks comes from a consumer price index called the CPI-W, which stands for Consumer Price Index for Urban Wage Earners and Clerical Workers.
This index summarizes price changes of more than 200 goods and services, weighted by the preferences of families who earn at least 50% of their income from wage and salary work. The CPI-W is then averaged for the third quarter of the year (July, August and September) and compared to the previous year’s average. This happens in the second week of October and produces our COLA, which is fully implemented for everyone. Social security audits until next January.
Why are the current projections not good news for your Social Security checks?
It is important to realize that the first problem you will encounter when you look at the data on the increase in your Social Security checks and the expected COLA increase is that although recent Inflation statisticsit is nevertheless a lagging indicator of the functioning of the economy. Each of these problems, whether geopolitical, catastrophic, legislative or demographic, must occur before a noticeable change is reflected in the inflation data.
Of course, there are some clues you can look for, such as the news. However, sometimes the true impact and magnitude of an event on inflation numbers is not known or takes months to become apparent. One such example was the impact of the COVID-19 pandemic. Although the blunt force of this event occurred in 2020 and 2021 and the impact on inflation was evident when it rose to 8% in 2020, the impact on Cost of Living Adjustment (COLA) However, the strongest increase did not occur until 2022, two years later.
This is important because the latest COLA expectations are around 2.6%, which is lower than last year’s 3.2% and the lowest reading in the last four years. However, it is important to remember that we are still missing the final piece of the puzzle: the CPI-W for September. At that point, the statistic will be around 300 this year, with July coming in at 308.5 and August at 308.64.
This news may be discouraging at first, because there is still a long way to go before we see major COLA increases in your Social security auditsHowever, because the COLA tracks inflation, the purchasing power of your money (and other assets) will not decline as much as expected, and you will not be forced to limit your purchases due to the impact of unchecked price increases on your cost of living; so there is a silver lining.
