The U.S. government has announced some important news about Social Security benefits. In 2025, the Cost-of-Living Adjustment (COLA) will rise by 2.5%.
While this might seem like good news, many retirees feel it’s not enough to keep up with the rising cost of living. These benefits are a big part of income for many seniors, and they worry the small increase won’t cover higher expenses.
Here’s what you need to know about the 2025 COLA, its impact on retirees, and how to plan better for financial stability during retirement.
What is the COLA for 2025?
The 2025 COLA will go up by 2.5%, starting January 1, 2025. This adjustment affects millions of retirees across the country.
For example:
- If your current monthly Social Security check is $1,922, you’ll get $48 more each month.
- Over the year, this adds up to an extra $577.
Although this increase provides some help, it’s less than the average COLA of 2.6% over the past 20 years. Let’s compare with recent years:
- 2022: 5.9% increase
- 2023: Record-high 8.7% increase
- 2024: 3.2% increase
The smaller 2025 COLA worries many retirees. In a recent survey:
- 54% said the 2.5% increase isn’t enough.
- 31% felt it was completely inadequate.
Why Are Retirees Struggling?
The COLA is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index doesn’t fully reflect the spending habits of retirees, especially on healthcare, which is one of their biggest expenses.
Experts suggest switching to a different measure, like the Consumer Price Index for the Elderly (CPI-E), to better address retirees’ needs.
How to Boost Income During Retirement?
Since Social Security benefits alone may not be enough, retirees should consider creating extra income streams. Here are some ideas:
- Part-time work: Earn extra cash and stay active.
- Investments: Put money in stocks, bonds, or mutual funds.
- Rental income: Rent out property for steady earnings.
- Savings accounts or CDs: Use these for reliable interest income.
- Employer pensions: Take advantage of workplace retirement plans.
- Reverse mortgages: Use the value of your home for extra money.
Simple Tips to Manage Rising Costs
Here are a few ways to make your money go further:
- Revisit your budget: Cut unnecessary costs or switch to cheaper services.
- Earn extra money: Try freelancing, consulting, or online jobs.
- Plan: Spread out your savings and investments for better security.
The Bottom Line
The 2.5% COLA increase for 2025 provides some relief but doesn’t solve the larger problem of rising expenses. It’s important for retirees to plan proactively, explore additional income options, and make smart financial decisions. These steps can help ensure a stable and comfortable retirement, even as costs continue to climb.
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