*by Kevin Slater, Lead Advisor, CEO, CFP®*

Social Security beneficiaries will get a 2.5% raise for 2025! This is not the first time they have increased payouts. In fact, they have a formula - Good old CPI-W!

CPI-W Explains It All (But Not Always in Time)

The US Bureau of Labor Statistics (BLS) calculates this version of the Consumer Price Index (CPI) by measuring the spending of urban wage earners and clerical workers, about 28% of the US population, where most income comes from clerical or hourly wage jobs. The CPI you hear about most often, CPI-U, tracks expenses for a broader sample of the overall US population.

So, what’s wrong with a raise? The problem is receiving it a year after prices have already gone up. This is not a problem when inflation is low, but it certainly can be when prices are jumping in back-to-back years, as they did in 2021 and 2022. Social Security checks were not increasing fast enough for those dependent upon them.

Takeaways: Social Security provides nice inflation-adjusted benefits - however, client portfolios must also be built to cover shortfalls as they appear in the economy.