Here's how Social Security benefits may change in 2025

July's annual inflation rate hit below 3% for the first time since 2021, according to the latest Consumer Price Index (CPI). However, for seniors and retirees, the products and services that they need might actually be outpacing the overall rate of inflation. Yahoo Finance Senior Columnist Kerry Hannon breaks down the July CPI report and what it means for Social Security.

"This is a pretty good report, but when you look under the covers a bit at what seniors actually spend their money on, these things are not letting up. They're still stinging their pocketbooks a bit," Hannon explains. She points to the rising price of groceries, healthcare, and housing that are putting a strain on Americans' wallets.

As seniors and retirees face these cost pressures, there may be good news ahead. Hannon explains that the Social Security will use July's inflation data as one of the factors it considers when deciding how much to increase the Social Security benefit in 2025. "This is one great thing that actually Social Security does adjust for inflation. But is it adjusting enough for what seniors spend on is the big question," she explains. July's report will be combined with forthcoming economic data from August and September to weigh on the final decision.

Many expect Social Security benefits to increase 2.6% in 2025, far below the 8.7% received in 2023.

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This post was written by Melanie Riehl

Video Transcript

July's annual inflation rate hitting below 3% for the first time since 2021.

That's good news.

Right.

Well, for seniors and retirees, the products and services that they need might actually be outpacing the overall rate of inflation to discuss.

We've got Yahoo Finance's very own carry.

Hannon.

Hey, Carrie.

Hey, Brad.

Uh great to be here this morning.

Yeah, I mean, good news.

Right.

Well, this is a pretty good report but when you look under the covers a bit at what seniors actually spend their money on these things are not letting up.

Right.

They're still getting stinging their pocketbooks a bit.

We've got, you know, uh food prices are up.

We, you spoke earlier in a segment about egg prices being up.

So you got egg, eggs are up.

Meat is up, poultry is up.

These things that, you know, people need to get by on our health care costs are up, you know, physician services are up, prescription drugs are up.

So that's another category housing is up, you know, that, that continues to be an issue, rent as well as owning a home.

And again, auto insurance is also ticked up another big one.

Electricity over the last year, it has jumped about 5% and we know with the hot summer we're all having, this is actually an issue.

Um So we have some of these costs that seniors have that really are, you know, they're not benefiting from the, the dip down that we're seeing in overall inflation numbers.

And here's what that's gonna mean moving forward.

This is the first month, the numbers, the inflation data from July is the first month that um the Social Security administration will look at to see how much they're gonna bump up that social Social Security benefit next year in 2025.

And of course, this is one great thing that actually Social Security does adjust for inflation.

But is it adjusting enough for what seniors spend on is the big question?

So we have the bump up, uh you know what, we had the inflation dipping, you know, coming down today.

So they're going to take the data from July, August and September those three months and they're going to compare it to what it last year to come up with, what the increase will be in 2025.

They announced that in October, but the number that, that I'm hearing right now is, you know, about 2.6% might be the increase we see for the 2025 checks.

That's far below uh the 8.7% we got two years ago and 3.2% increase this year.

So it's a substantial dip down in terms of what the cola might be uh for this year.

But I do think um for twe announced this year for 2025.

So I mean, we have to look at these great inflation or I I say positive inflation trend numbers today in perspective to what seniors actually are feeling uh in their monthly budgets.

Yahoo Finance is Carrie Hannon Kri.

Thanks so much for tracking this and continuing to break it down for us.

Appreciate it.