Social Security Retirees on Track for a Major Disappointment in October

October is a big month for Social Security retirees, as an announcement comes that will shape their finances for the coming year. Unfortunately, this month, retirees are likely to face disappointment for a number of key reasons.

Here's why seniors are on track for a rough time this month.

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The Social Security COLA announcement will be delayed

The first disappointment seniors are faced with this month is the need to wait longer than usual to find out how big their cost-of-living adjustment will be. Normally, the COLA announcement comes on Oct. 15, but that day has come and gone with no news of the raise.

That's because the government shutdown has delayed the availability of the data needed to calculate the COLA. Social Security uses data from the third quarter that is collected by the Bureau of Labor Statistics to determine how big the cost-of-living adjustment will be. Specifically, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is used to determine whether Social Security beneficiaries will get a raise, and how big it is going to be.

If the third-quarter CPI-W data shows prices are rising on the goods and services that are included in the Consumer Price Index, then a Social Security COLA occurs for the upcoming year. The delay of the data from September forces seniors and others who collect Social Security benefits to wait longer than usual to understand what their finances will look like in the upcoming year. This can throw a wrench in their retirement planning process.

The COLA is a no-win situation

The COLA announcement is going to be a big disappointment for more reasons than just the delay, though. The other issue is that it's really a no-win situation. That's because both a big COLA and a small one are going to seem like bad news to retirees who rely on their benefits to help them cover costs without taking too much money out of their retirement plans too fast.

Right now, early projections say that the COLA is on track to be bigger than the benefits increase retirees got in 2025. This year, Social Security recipients saw their checks rise by 2.5%. Next year, however, the benefits increase is looking like it's going to be around 2.7%, according to the Senior Citizens League, which is a senior advocacy group that has used CPI-W data up to this point in the year to estimate what the cost-of-living adjustment will be.

Unfortunately, a bigger raise like this only happens because inflation is still higher than normal. And that's bad news for retirees, who typically have other income sources beyond Social Security that can lose buying power when inflation is surging. If retirees get a slightly bigger raise, but the real value of their savings accounts and 401(k) accounts declines, and they end up being able to buy less because the cost of goods and services has climbed so much, they are definitely not going to feel better off.

On the flip side, if the COLA comes in lower than anticipated, that's also not great news for those collecting benefits, because the COLAs have been pretty substantial recently in the post-pandemic era. For Social Security recipients who have gotten used to big benefit bumps each year, getting only a small one is definitely not going to feel like a win.

That's especially true given that Medicare premiums are increasing substantially next year and could eat up close to half of the benefit increase received by the average retiree.

All this means that there's very likely going to be no good news for retirees collecting Social Security, as they'll either be looking at a raise that feels too low after several years of big ones, or will get a big raise, but will have to cope with continued high inflation that erodes their buying power on income from other sources.

These aren't great outcomes, and retirees should start preparing themselves to make a budget that accounts for high inflation and works with whatever raise comes their way.

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