COLA 2025 Pay Raise is looking to be smaller for Social Security, Veterans Disability Compensation

hey thanks for making it to Veterans infot tap I'm glad you made it there is another projection put out by the mly fool for Cola that cost of living adjustment that pay increase remember we are halfway actually more than halfway through the thre Monon period in which uh the Social Security Administration uh looks at to calculate Cola now I'm also going to let you know that there are two different colas cost of living adjustments that the VA actually implements one is mirroring the Social Security administration's Cola cost of living adjustment every year Congress jumps in and says hey we authorize the VA to mirr the cola for Social Security recipients and then the VA just adopts that number so that's one the other well I guess it's important to say that that Cola affects your VA compensation pension um other various things uh dependency andity compensation and so forth so there's another Cola that the VA implements but they figure out that number themselves uh the last uh and it goes into effect earlier so October 1st is when that one goes into effect we typically hear about it uh anytime within the next month or so we should hear what it will be last year it was 6.2% and it directly impacts uh educational type benefits employment benefits such as vr& veterans Readiness and employment the stien that you receive if you're in that program was affected by that Cola not the Social Security Cola uh chapter 35 education benefit affected by the 6.2% uh Cola adjustment uh internal to the VA not the Social Security administration's version so we have two different colas that get calculated this Cola is the one that affects your VA compensation pension um dependency and dimity compensation that type of stuff and uh again this is by the mly fool I'm going to read through it here and U just share with you this news I mean we are almost almost 2third of the way through the data at this point so with that being said please hit the thumbs up subscribe share with a friend all that good stuff I truly appreciate it uh two asks I that's really it hit the thumbs up and let the video run uh if you want to support the channel in other ways consider being a member I really appreciate all of you members so much thank you all right so let's jump into this the Social Security cost of living adjustment Cola forecast for 2025 was just updated there's good news and bad news for retirees now obviously the focus here is on Social Security recipients uh those that are uh you know typically retired and receiving their social security benefit how however you can also insert VA disability compensation right so disabled veterans can also uh be inserted in there as well so there are uh some key points it says here and then I'm going to jump into the um into the article so it says key points this there's three of them the senior citizens League estimates that social security benefits will receive Social Security benefits will receive a 2.6% sent Cola next year the smallest raise for retired workers since 2021 and again VA just has to adopt whatever Social Security comes up with based on that data next one here is social security benefits have reportedly lost 20% of their purchasing power since 2010 I'm going to throw in a notation that if Social Security benefits reportedly lost 20% of their purchasing power since 2010 then so has VA compensation and the other various uh monetary benefits as pension or or dependency andity compensation why because what they're looking at is they are basically alluding to the fact that inflation has done this and cola has done this so sure they're both upward Trends But as time is going by the Gap is getting bigger and bigger between the adjustment and the actual inflation realized so with that uh that's what they're saying with that 20% of their purchasing power since 2010 and benefits will lose more buying power next year if the cola um under uh underestimates inflation right so here we are next one third key Point some experts believe Cola should be based off the CPI e inflation rather than CPI W inflation but others believe that two figure uh the two figures average out over time all right so for those that don't know there has been a couple pieces of legislation that have floated around regarding changing how Cola is calculated instead of using the current CPI W uh which is uh taking into account Urban wage earners and all that good stuff and moving it over to the CPI e which is the Consumer Price Index for elderly different spinning pattern habits and so forth um different uh uh needs versus wants all that stuff and what I have heard and and read and and looked at is if you took say the past 20 years on average the CPI would have warranted a about a 20 um about a quarter percent about a 25 basis point uh increase versus the standard CPI W so it's not it's not much but it is higher so uh the last thing here it says um that uh well I guess it really doesn't say anything so there's this those are the three key points let's jump into the actual article here uh so it goes on Social Security 2025 cost of living adjustment is on Pace to be the smallest raise for retired workers since 2021 Social Security benefits get annual cost of living adjustments to help beneficiaries and again Social Security insert veterans uh benefits right so uh so Social Security and Veterans uh benefits get an annual cost of living adjustment to help beneficiaries keep Pace with the rising prices across the economy inflation has moderated in recent months okay that's not good for it's good and it's not right so costs are coming down that means that the inflation so they say is coming down and that means that your Cola will be less so it's it's funny that it's happening in these months right ha haa welcome to the July August September uh so anyway uh inflation has moderated in recent months and the uh that trend is expected to continue so the senior citizens League recently revised its 2025 Cola forecast downward I'll be it modestly the 2025 Cola prediction is about 2.57% down from 2.63% last month according to the senior citizen League statistician Alex Moore the good news is that colas are rounded to the nearest tenth of a percent so both estimates imply payouts uh will increase 2.6% in 2025 the bad news is is that that would be the smallest raise for retired workers and again retired workers Social Security recipients disabled veterans surviving spouses uh veterans on pension all of those uh smallest since 2021 however there are more serious problems the senior citizens League estimate Social Security benefits have lost 20% of their purchasing power since 2010 because colas have consistently failed to keep Pace with inflation the accuracy of that figure is debatable but other evidence supports the idea that benefits have lost purchasing power I would say well okay then what right you have a choice you can just sit and complain or you can ask actually in numbers right one person doesn't mean much but if we get a lot of people calling your Congressional members calling uh your uh our uh chairman of the veterans committees and the um uh ranking member of the uh committees for veterans on both the house and the Senate side and let them know right how you feel about the fact that Cola calculated for disabled veterans sucks and um we have uh been behind the curve for way too long and that needs to be adjusted will something happen maybe maybe not but the the reality is is that again there has been legislation floating around and the VA does implement its own Cola cost of living adjustment for vr& and for chapter 35 it was 6.2% now maybe they're just bringing it up to speed but boy that 6.2 would have been nice last year just saying if it actually rolled out to everyone all right so let's move on two-thirds of seniors surveyed by the senior citiz Senior Citizens League this year said that the 2024 Cola failed to cover the increase in their basic house household expenses additionally 26% of retired workers surveyed by the employee benefit Research Institute said they lacked confidence in their ability to finance retirement that was the second worst reading since 2015 here's another interesting thing right Cola calculated using the last quarter of the fiscal year July August September or the third quarter of the calendar year whatever you want to call it the bottom line is July August September col is then announced once the September numbers come in which is typically you know around the you know end of the second week of October and uh then they announced the cola figures so what's crazy crazy is we do this in a thre Monon little snapshot then we decide how much we're going to get for an increase then that increase doesn't even get implemented until uh December 1st which you don't really see that in a payment until uh your January 1 payment so you you have months going by after Co is calculated and if inflation skyrockets or shoots up after September doesn't matter right so effectively what happens is is you're behind the ball before you even get your increase to begin with it's it's a horrible system it needs to be revamped all right moving on unfortunately Social Security 2025 Cola May once again underestimate inflation meaning benefits could lose more buying power next year what are your thoughts on that by the way uh so moving on Social Security benefits could lose uh buying power in 2025 theoretically annual cost of living adjustments protect the buying power I love that they started that with theoretically annual cost of living adjustments protect the buying power of Social Security benefits and yep that's right veterans benefits too by ensuring payouts increase at the same Pace as inflation but again this is the this is the trajectory right so the the inflation's doing this meanwhile Cola is doing this sure they're both upward trends but there is a gap and that gets that Gap gets bigger every year so the cola uh applied to benefits in any given year is equivalent to the percent increase in the Consumer Price Index for urban wage earners and clerical workers the CPI W during the third quar of third quarter of the previous year meaning the three-month period between July and September for that reason the official 2025 Cola cannot be calculated until the third quarter CPI W data is available in October the CPI W is a subset of the Consumer Price Index that measures inflation based on the spinning patterns of hourly workers which is weird right which is weird that they would base it on that when it's Social Security recipients which typically don't work uh and if they do it's extremely part-time uh or they're completely retired but that's what they're going to base it upon it makes no sense uh so inflation so is a subset of the Consumer Price Index that measures that measures inflation based on the spitting habits and patterns of hourly workers but that methodology makes little sense considering workers tend to be young people who spend money differently from retirees on social security for instance retired workers typically spend more on housing and medical care and less on education and transportation for that reason several policy analysts and advocacy groups believe Cola should be based on a different subset of the Consumer Price Index for El for the elderly the CPI e again if this is something that you think makes sense maybe reach out to your Congressional member and let them know the CP measures inflation based on the spending patterns of individuals aged 62 and older which theoretically makes it a better gauge of how pricing pressures across the economy impact Social Security recipients CPE better reflects the change in prices that older adults face according to Richard Johnson director of the program on retirement policy at the urban Institute similarly the senior citizens league and AARP formerly the American Association of retired persons uh have also Express support for the CPE as have numerous politicians indeed over a dozen bills introduced in Congress during the last decade stipulated that colas should be based on the CPI e unfortunately the CPE is a true is unfortunately if the CPE is truly a better gauge of inflation for Social Security recipients then benefits are on Pace to lose buying power in 2025 I say that because the CPI inflation has exceeded CPI W inflation every month this year so if you look at the average through January through July so this calendar year January through July the average uh CPI W inflation is 3.1% the average CPI e inflation is 3.5% so this would be a a 4% uh uh difference between the two or 40 basis points which is which is fairly substantial I mean and and if you think about a number like that not in the given year right that's kind of small but when you compound it year over year over year over year it actually becomes something very substantial moving on as shown above CPE inflation outpace CPI W inflation by 410 of uh a percentage Point through the first seven months of the year if the CPE is more accurate me um if the CP is a more accurate metric then Social Security 2025 Cola is on Pace to be the four to be 410 of a perent point2 small that means benefits will lose buying power next year provided that uh the trend persists through September which makes or which would Mark the end of the third quarter of the calendar year a small SLI a small silver lining for Social Security recipients not all Social Security Experts believe colas should be calculated differently uh Alicia Mel director of the center for Retirement Research at Boston College co-author of a paper in 2021 showing that CPI and inflation was nearly identical to CPI W inflation between 2002 and 2021 additionally Mel told CNBC in 2022 that benefit increases based on the CPI W will fully compensate for inflation over time much ad do has been uh made about the discrepancy between the CPI and the CPI W in 2023 specifically the CPI W increased 3.2% % in the third quarter last year so Social Security benefits got 3.2% cola this year but the CPE increased 4% but the CPI increased 4% in the third quarter last year meaning Social Security benefits would have increased 4% had the cola been based on the CPI again if you agree with utilizing the CPE now granted this is just data on a on a a few different notes here but um if this is something that you think you should be looking into maybe do a little research and then let your Congressional member know how you feel however if Mel is correct that discrepancy will average out in time that doesn't put extra money in retirees Pockets today but it is a small silver linning because it suggests that uh the situation will eventually improve I don't know if I fully agree based on the stuff that I've seen and read now granted I'm not you know researching anything you know too deep but uh I think that if you had to compare the two over the past 20 years uh you're going to come out a little 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receive Social Security so those of you out there that know uh a little more than I do on the Social Security aspect please chime in I appreciate it if you hung on till the end with that thank you so much for watching I really appreciate each and every one of you have a great one and remember if we don't take care of each other something went wrong