Small Cost-of-Living Boost Expected for Veterans Benefits in 2025: Know Why the COLA Matters

Veterans and Social Security recipients are likely to see a modest increase in their benefits in 2025.

After enjoying larger adjustments in recent years, beneficiaries may be disappointed by the expected cost-of-living adjustment (COLA), which is projected to be less than 3%.

This would mark the smallest increase since before the COVID-19 pandemic, a significant shift from the higher boosts seen during the pandemic years.

Veterans Will See a Smaller Increase

According to a recent announcement by the Senior Citizens League, an affiliate of TREA: The Enlisted Association, the COLA for 2025 is estimated to be less than 2.6%.

This projection is considerably lower than the 3.2% adjustment implemented at the beginning of 2024, which itself was a step down from the 8.7% adjustment in 2023.

If this prediction holds, it will be the lowest adjustment since early 2020, when the COLA was just 1.3%.

Why the COLA Matters

The COLA is a crucial factor in determining the financial well-being of millions of Americans, including veterans.

It’s calculated annually based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which tracks changes in the cost of goods and services.

When inflation is low or when wages for these workers don’t increase, the COLA reflects these conditions, resulting in a smaller adjustment.

The annual COLA announcement, typically made in early October, is eagerly anticipated because it directly impacts the financial stability of individuals relying on Social Security and veterans’ benefits.

Given the rising costs of living, many beneficiaries may find a smaller COLA insufficient to cover their expenses, further stressing their budgets.

Impact on Veterans

The impact of the COLA on veterans is particularly significant because Congress ties veterans’ benefits adjustments to the Social Security Administration’s COLA calculations. This means that any change in the Social Security COLA directly affects veterans’ benefits, including disability compensation, clothing allowances, and other support programs.

An estimated 5 million veterans and 2 million military retirees receive monthly benefits from the Department of Veterans Affairs (VA).

For example, a veteran currently receiving $1,500 per month in disability payouts would see an increase of just $39 per month with a 2.6% COLA. In contrast, the 2023 adjustment provided an extra $130 per month, demonstrating the considerable difference a higher COLA can make.

Challenges for Veterans and Seniors

The projected smaller COLA for 2025 comes at a time when inflation remains above pre-pandemic levels.

The Senior Citizens League has emphasized that the government’s inability to return inflation to those levels has added pressure on both veterans and seniors who depend on these adjustments to manage their daily expenses.

For veterans, a smaller COLA means they might struggle more to keep up with rising costs of living, from housing to healthcare. Similarly, seniors, many of whom rely heavily on Social Security for their monthly income, could find it more challenging to cover essential expenses like groceries, utilities, and medical bills.

Looking Ahead

While the final COLA for 2025 won’t be announced until October, the projection of a less than 3% increase sets the stage for a year of tighter budgets for veterans and seniors. The accuracy of the Senior Citizens League’s past projections gives weight to their current estimate, so many are preparing for a smaller boost in their benefits.

Despite the expected smaller increase, any COLA provides some relief by helping beneficiaries partially keep up with inflation.

However, with the cost of living continuing to rise, especially in essential areas like housing and healthcare, many veterans and seniors may need to explore additional financial resources to maintain their standard of living.

FAQs