The Social Security Administration on Thursday announced that the cost-of-living adjustment will be 2.5% in 2025.
When that increase goes into effect, it will be the lowest adjustment to benefits that beneficiaries have seen since 2021, when the cost-of-living adjustment, or COLA, was 1.3%.
The Social Security cost-of-living adjustment was put in place to help benefits keep pace with inflation.
The COLA is calculated based on a subset of the consumer price index known as the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. The percentage increase in the CPI-W from the third quarter of last year to the third quarter of this year determines the cost-of-living adjustment.
As government inflation data shows the pace of inflation has subsided, the size of the annual increase to benefits has come down.
“It’s better when the number is small, because it means that the inflation experienced by seniors is not as bad as it might have been,” said Charles Blahous, senior research strategist at George Mason University’s Mercatus Center.
The 2025 adjustment is not the lowest the Social Security COLA has been. In 2016, 2011 and 2010, it was zero, and beneficiaries saw no increase at all in those years.
Still, for retirees, people with disabilities and other beneficiaries, the lower adjustment for 2025 comes as they continue to grapple with high costs.
“Before the inflation got so high, we just took lower costs for granted,” said Mary Johnson, an independent Social Security and Medicare policy analyst who is also a Social Security beneficiary. “It really has significantly changed how we have to manage since then.”
Having a lower cost-of-living adjustment when prices are still high — and when inflation was higher in the earlier part of this year — is going to be a “real sticker shock for some people,” said Shannon Benton, executive director at The Senior Citizens League.
Experts debate best COLA measurement
There is a debate among advocates and lawmakers as to whether a different measurement should be used for the cost-of-living adjustment. Such a change would have to be approved by Congress.
The current annual increase that’s automatic and compounds from year to year is very valuable, said Jenn Jones, vice president for government affairs at senior advocacy group AARP.
“That makes Social Security really unique and really special and important for older Americans,” Jones said.
AARP supports a COLA measurement that is accurate and reflective of what older Americans are spending, she said. Another experimental index — the Consumer Price Index for the Elderly, or CPI-E — may better reflect seniors’ spending patterns, the nonpartisan group argues.
“Whenever Congress chooses to act in a bipartisan way to finally shore up Social Security’s financial future, we do believe that CPI-E should be a part of that discussion,” Jones said.
After the announcement of the COLA for 2025 on Thursday, other senior advocacy groups also spoke out in favor of switching to the CPI-E, including the National Committee to Preserve Social Security and Medicare, and Social Security Works.
“The traditional formula (CPI-W) does not fully account for the impact of inflation on the goods and services seniors spend the most money on — especially health care and housing,” Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare, said in a statement.
Not everyone agrees the CPI-E would be the best measure. Because one-third of Social Security beneficiaries are not elderly, it would not make sense to use an index focused on that population, Blahous said. Instead, he said, the chained CPI, which measures changes in consumer spending patterns, would be a better fit.
Washington lawmakers have proposed bills that would change the way Social Security’s annual cost-of-living adjustment is measured, prompting Social Security Works to declare “Social Security’s COLA is on the ballot” this November in a statement released Thursday.
A person holds a sign during a protest against cuts made by U.S. President Donald Trump’s administration to the Social Security Administration, in White Plains, New York, U.S., March 22, 2025.
Nathan Layne | Reuters
The Trump administration’s appeal of a temporary restraining order blocking the so-called Department of Government Efficiency from accessing sensitive personal Social Security Administration data has been dismissed.
The U.S. Court of Appeals for the 4th Circuit on Tuesday dismissed the government’s appeal for lack of jurisdiction. The case will proceed in the district court. A motion for a preliminary injunction will be filed later this week, according to national legal organization Democracy Forward.
The temporary restraining order was issued on March 20 by federal Judge Ellen Lipton Hollander and blocks DOGE and related agents and employees from accessing agency systems that contain personally identifiable information.
That includes information such as Social Security numbers, medical provider information and treatment records, employer and employee payment records, employee earnings, addresses, bank records, and tax information.
DOGE team members were also ordered to delete all nonanonymized personally identifiable information in their possession.
The plaintiffs include unions and retiree advocacy groups, namely the American Federation of State, County and Municipal Employees, the Alliance for Retired Americans and the American Federation of Teachers.
“We are pleased the 4th Circuit agreed to let this important case continue in district court,” Richard Fiesta, executive director of the Alliance for Retired Americans, said in a written statement. “Every American retiree must be able to trust that the Social Security Administration will protect their most sensitive and personal data from unwarranted disclosure.”
The Trump administration’s appeal ignored standard legal procedure, according to Democracy Forward. The administration’s efforts to halt the enforcement of the temporary restraining order have also been denied.
“The president will continue to seek all legal remedies available to ensure the will of the American people is executed,” Liz Huston, a White House spokesperson, said via email.
The Social Security Administration did not respond to a request from CNBC for comment.
Immediately after the March 20 temporary restraining order was put in place, Social Security Administration Acting Commissioner Lee Dudek said in press interviews that he may have to shut down the agency since it “applies to almost all SSA employees.”
Dudek was admonished by Hollander, who called that assertion “inaccurate” and said the court order “expressly applies only to SSA employees working on the DOGE agenda.”
Dudek then said that the “clarifying guidance” issued by the court meant he would not shut down the agency. “SSA employees and their work will continue under the [temporary restraining order],” Dudek said in a March 21 statement.
Many Americans are paying a hefty price for their credit card debt.
As a primary source of unsecured borrowing, 60% of credit cardholders carry debt from month to month, according to a new report by the Federal Reserve Bank of New York.
At the same time, credit card interest rates are “very high,” averaging 23% annually in 2023, the New York Fed found, also making credit cards one of the most expensive ways to borrow money.
“With the vast majority of the American public using credit cards for their purchases, the interest rate that is attached to these products is significant,” said Erica Sandberg, consumer finance expert at CardRates.com. “The more a debt costs, the more stress this puts on an already tight budget.”
Most credit cards have a variable rate, which means there’s a direct connection to the Federal Reserve’s benchmark. And yet, credit card lenders set annual percentage rates well above the central bank’s key borrowing rate, currently targeted in a range between 4.25% to 4.5%, where it has been since December.
Following the Federal Reserve’s rate hike in 2022 and 2023, the average credit card rate rose from 16.34% to more than 20% today — a significant increase fueled by the Fed’s actions to combat inflation.
“Card issuers have determined what the market will bear and are comfortable within this range of interest rates,” said Matt Schulz, chief credit analyst at LendingTree.
APRs will come down as the central bank reduces rates, but they will still only ease off extremely high levels. With just a few potential quarter-point cuts on deck, APRs aren’t likely to fall much, according to Schulz.
Despite the steep cost, consumers often turn to credit cards, in part because they are more accessible than other types of loans, Schulz said.
In fact, credit cards are the No. 1 source of unsecured borrowing and Americans’ credit card tab continues to creep higher. In the last year, credit card debt rose to a record $1.21 trillion.
Because credit card lending is unsecured, it is also banks’ riskiest type of lending.
“Lenders adjust interest rates for two primary reasons: cost and risk,” CardRates’ Sandberg said.
The Federal Reserve Bank of New York’s research shows that credit card charge-offs averaged 3.96% of total balances between 2010 and 2023. That compares to only 0.46% and 0.43% for business loans and residential mortgages, respectively.
As a result, roughly 53% of banks’ annual default losses were due to credit card lending, according to the NY Fed research.
“When you offer a product to everyone you are assuming an awful lot of risk,” Schulz said.
Further, “when times get tough they get tough for most everybody,” he added. “That makes it much more challenging for card issuers.”
The best way to pay off debt
The best move for those struggling to pay down revolving credit card debt is to consolidate with a 0% balance transfer card, experts suggest.
“There is enormous competition in the credit card market,” Sandberg said. Because lenders are constantly trying to capture new cardholders, those 0% balance transfer credit card offers are still widely available.
Cards offering 12, 15 or even 24 months with no interest on transferred balances “are basically the best tool in your toolbelt when it comes to knocking down credit card debt,” Schulz said. “Not accruing interest for two years on a balance is pretty hard to argue with.”
Andrew Ross Sorkin speaks with BlackRock CEO Larry Fink during the New York Times DealBook Summit in the Appel Room at the Jazz at Lincoln Center in New York City on Nov. 30, 2022.
In a new letter to investors, Fink writes the traditional allocation comprised of 60% stocks and 40% bonds that dates back to the 1950s “may no longer fully represent true diversification.”
“The future standard portfolio may look more like 50/30/20 — stocks, bonds and private assets like real estate, infrastructure and private credit.” Fink writes.
Most professional investors love to talk their book, and Fink is no exception. BlackRock has pursued several recent acquisitions — Global Infrastructure Partners, Preqin and HPS Investment Partners — with the goal of helping to increase investors’ access to private markets.
The effort to make it easier to incorporate both public and private investments in a portfolio is analogous to index versus active investments in 2009, Fink said.
Those investment strategies that were then considered separately can now be blended easily at a low cost.
Fink hopes the same will eventually be said for public and private markets.
Yet shopping for private investments now can feel “a bit like buying a house in an unfamiliar neighborhood before Zillow existed, where finding accurate prices was difficult or impossible,” Fink writes.
60/40 portfolio still a ‘great starting point’
After both stocks and bonds saw declines in 2022, some analysts declared the 60/40 portfolio strategy dead. In 2024, however, such a balanced portfolio would have provided a return of about 14%.
“If you want to keep things very simple, the 60/40 portfolio or a target date fund is a great starting point,” said Amy Arnott, portfolio strategist at Morningstar.
If you’re willing to add more complexity, you could consider smaller positions in other asset classes like commodities, private equity or private debt, she said.
However, a 20% allocation in private assets is on the aggressive side, Arnott said.
The total value of private assets globally is about $14.3 trillion, while the public markets are worth about $247 trillion, she said.
For investors who want to keep their asset allocations in line with the market value of various asset classes, that would imply a weighting of about 6% instead of 20%, Arnott said.
Yet a 50/30/20 portfolio is a lot closer to how institutional investors have been allocating their portfolios for years, said Michael Rosen, chief investment officer at Angeles Investments.
The 60/40 portfolio, which Rosen previously said reached its “expiration date,” hasn’t been used by his firm’s endowment and foundation clients for decades.
There’s a key reason why. Institutional investors need to guarantee a specific return, also while paying for expenses and beating inflation, Rosen said.
While a 50/30/20 allocation may help deliver “truly outsized returns” to the mass retail market, there’s also a “lot of baggage” that comes with that strategy, Rosen said.
There’s a lack of liquidity, which means those holdings aren’t as easily converted to cash, Rosen said.
What’s more, there’s generally a lack of transparency and significantly higher fees, he said.
Prospective investors should be prepared to commit for 10 years to private investments, Arnott said.
And they also need to be aware that measurement issues with asset classes like private equity means past performance data may not be as reliable, she said.
For the average person, the most likely path toward tapping into private equity will be part of a 401(k) plan, Arnott said. So far, not a lot of companies have added private equity to their 401(k) offerings, but that could change, she said.
“We will probably see more plan sponsors adding private equity options to their lineups going forward,” Arnott said.