Social Security benefits are relied upon by millions of older people to compensate the majority, if not all, of their retirement expenses. However, living on these benefits alone has been hard since inflation has hit record highs in recent years. Although inflation is finally beginning to cool down, it could come with an unexpected flip side—a smaller-than-expected cost-of-living adjustment (COLA) for 2025.
If you want to know what next year’s Social Security increase will look like, make sure to circle October 10 on your calendar. This is when the Social Security Administration (SSA) is expected to announce formally the 2025 COLA. But projections made earlier suggest that this will be less than what was given as an increase in 2024 unless there is a sudden spike in inflation during September.
What We Know About the 2025 COLA So Far
Social Security COLAs are related to inflation data, specifically from the third quarter of the year. That’s why we won’t have the official figure until September’s Consumer Price Index (CPI) reading is released on October 10.
Based on current inflation trends, the nonpartisan Senior Citizens League (TSCL) is projecting a COLA increase of 2.57% for 2025. This is significantly different from the 3.2% increase they received in January 2024. However, this lower rate reflects a cooler inflation environment compared to the latter half of 2023.
Of course, this is just an estimate, and the final COLA may change slightly depending on September’s inflation data. But all signs point to a smaller COLA than retirees have seen in recent years, so it’s wise to prepare for a more modest increase.
What to Do When the Official Announcement Hits
October 10 is the day when you can head to the SSA’s website and find out about your 2025 COLA officially declared. Besides this, the SSA will also release other important information, such as the earnings-test limit for 2025, maximum monthly benefit, and wage cap for Social Security tax purposes.
If you’re worried that a smaller 2025 COLA might make it difficult to cope with your expenses, act now. Begin by looking at how much money you are spending presently and if there are any areas in which you could cut costs. Although adjusting your budget can allow for a slight decrease in COLA increment, more extreme measures could be required if funds are already limited.
Consider downsizing or moving to a more affordable area.
Transitioning from your palatial house to a smaller and less costly abode may save a fortune for those owning high-maintenance homes. Another choice would be to go for relocation to a region where living expenses are not so high. In case one has been living in an extremely expensive area, moving out of it into a more affordable neighborhood would be a good advantage.
Pick Up Gig Work to Supplement Your Income
For those who cannot afford to reduce costs or move into smaller spaces, it may be worth their while to consider picking up odd jobs now and then. Having an extra $100-$200 in your pocket monthly can help make up for poor COLA adjustments and is also a way of keeping something for oneself as pricing trends change.
It will not take long before you know what your Social Security raise will be by 2025. However, looking at early predictions indicates that it could be lower compared to previous years; consequently, planning should be done now on how you’ll handle retirement finances if such a raise does not meet up with your needs.
Maximizing Your Social Security Benefits
If you do wish to get the most from your Social Security benefit, some techniques may help you increase your payments every month. For example, delaying the receipt of retirement benefits or knowing how the whole system works in detail can see an increase of several thousand dollars per year.
Even though you may get a smaller COLA in 2025, proper planning and preparation will still enable you to maximize your social security benefits as well as have enjoyment during retirement.
