Social Security payments will be modified yearly, as they do pursuant to a cost-of-living adjustment or COLA, on the basis of maintaining senior citizens’ purchasing power. However, the adjustment for 2025 will be an uneventful 2.5%, the lowest rise in years. Many retirees, entirely dependent on this benefit, are likely to find this increase disappointing. Thus, it is important to understand the actual financial implications of this adjustment to plan for the future.
What the 2025 COLA means for Social Security checks
From $1,927, the average monthly Social Security check for retirees will rise to $1,976 starting January 1, 2025. This translates into an increase of $49. The average monthly check amount, however, has a caveat: the premiums for Medicare Part B are going up as well. In fact, at present, the standard monthly premium for Part B is $174.70, set to be raised to $185 in 2025. Thus, the net gain for beneficiaries who get both of them will be, in reality, closer to $39 after making that deduction.
Considering the increased cost of living, though, even so, this really slight increase will do no miracle to lessen the financial strains. Such income adjustments will go the way of other social security income:
- Retirement benefits
- Average: $1,948
- Age 62: $2,778
- Age 67: $3,918
- Age 70: $4,995
- Survivor benefits
- Average: $1,543
- Individual: $1,817
- Two Children: $3,744
- Disability benefits
- Average: $1,575
- Blind Recipients: $2,655
- Maximum: $3,918
- Supplemental Security Income (SSI)
- Average: $715
- Individual: $967
- Couples: $1,450
- Essential Person: $484
It is important to note that not all Social Security beneficiaries are affected by Medicare Part B premium increases. Social Security eligibility begins at age 62, while Medicare coverage starts at age 65. For those receiving Social Security but not yet enrolled in Medicare, the full COLA increase will be reflected in their checks.
Adapting to a smaller Social Security increase
If your Social Security check will only increase by around $39 per month in 2025, you may need to explore ways to stretch your budget. Here are a few strategies to consider:
Relocate to a more affordable area.
One of the advantages of Social Security is that benefit amounts remain consistent regardless of where you live. Moving to a region with a lower cost of living could significantly improve your financial situation. For instance, states with lower housing costs and reduced property taxes can free up more of your monthly income for other expenses.
Downsize or rent out space
However, a very expensive current home eats into your entire budget; downsizing to a small, valuable property will speak volumes. The utility bills, maintenance expenses, and taxes on property could be a lot cheaper at a smaller property. You could also consider renting out part of your home to make extra income since you can stay close to your community while reducing costs.
Explore flexible income opportunities
A sure way of adding some extra money to what you already have would be finding a part-time or gig job. For most seniors, flexible positions such as freelance or contract jobs are ideal for bringing in some extra money without stringing one along with a set work schedule. No matter how small such additional income is, it matters when the budgets are tight.
Preparing for financial changes
In case there is the 2025 COLA, it is rather unimpressive but will not need to beg for financial trouble. You can get your house in order for greater financial stability through changing your lifestyle and finding some creative ways to add.
Move, downsize, or earn more extra income; even with meager and painfully slow increases in Social Security and climbing Medicare premiums, taking the more proactive approach can help manage the effects.
Next year, the 2.5 percent COLA is going to look pretty inadequate. It also does not mean, however, that seniors should not engage in any activity that would prepare them for a comfortable financial life despite these limits. Preparing to adapt strategically to such kinds of change could be seen as a preventive measure.
