The Social Security Cost of Living Adjustment (COLA) is a critical aspect of the program, helping beneficiaries keep pace with inflation. For 2025, experts anticipate another significant COLA increase, making it an essential topic for Social Security recipients and those planning for retirement. In this article, you need to know about the Social Security COLA increase for 2025, including how it’s calculated, what the projected increase is, and how it will impact your benefits.
Projected COLA Increase for 2025
If you’re among the millions of older Americans who rely heavily on Social Security to make ends meet in retirement, then you may be reeling over the fact that your benefits are only going to rise by 2.5% in January.
Social Security’s upcoming cost-of-living adjustment (COLA) is the smallest (by far) to arrive in years. And a meager is natural to be disappoint it increase in your monthly checks.
But when we look back at the data, it becomes clear that a 2.5% Social Security COLA isn’t so terrible. In fact, it’s a lot more generous than some of the COLAs beneficiaries have seen in the past.
The outcome could’ve been much worse
In 2024, Social Security benefits rose by 3.2%. The year prior, they increased by 8.7%. And in 2022, a 5.9% COLA came through.
In light of these numbers, it’s easy to see why a 2.5% COLA for 2025 seems like a slap in the face. But you should also know that a period of rampant inflation is fuel these recent COLAs .
The whole reason 2025’s Social Security COLA is going to be much smaller is that inflation has eased nicely over the past year. So what seniors lose in the form of a smaller COLA, they gain in the form of less drastic price increases on their essential expenses.
It’s also important to recognize that a 2.5% Social Security raise is by no means the worst-case scenario as far as the program’s COLAs go. On three separate occasions – 2010, 2011, and 2016 – seniors on Social Security got a 0% COLA. And as recently as 2021, Social Security’s COLA was only 1.3%. So while a 2.5% COLA may not exactly be cause for celebration, it’s also not a catastrophically low raise.
How to make a 2.5% COLA work for you
If you’re already feeling like you can barely cover your living costs in retirement, then a 2.5% Social Security COLA may not do much to change your financial picture in 2025. So if that’s the case, be proactive in bettering your finances.
Start by re-evaluating the things you spend money on. Is it really necessary to pay for a car when you have access to public transportation around the corner? Do you need to hang on to your 2,400-square-foot home when a property half that size could be a lot less expensive to maintain?
Next, reassess your ability to earn money. You might assume that if you’ve been retired for years, it’ll be too difficult to break back into the workforce. But there may be opportunities to consult in your former field if you have unique skills, or if you’ve kept up on industry changes. Plus, there’s always the gig economy, which is available to you regardless of your age or the number of years you’ve gone without a job-related paycheck.
It’s not a strange thing to wish for a larger boost from Social Security than the 2.5% raise that’s about to arrive in 2025. But it’s also important to put that increase in perspective, and to take steps of your own to make up for a COLA that isn’t what you want it to be.
Impact of the 2025 COLA Increase
Social Security beneficiaries can feel the effect of a COLA adjustment no matter how slight. Below are the potential impacts of the 2025 COLA increase on the particular groups:
1.Retirees
The COLA adjustment is advantageous for retirees that are highly dependent on the social security monetary benefits. More so considering the rapid inflation of health care services, cost of housing and, groceries, the additional cash will be a relief from some of the inflation pressures. For instance, a benefit of $1,500 every month would increase by $45 after a 3% COLA increment.
2.Disabled individuals
Disabled individuals who receive Social Security Disability Insurance (SSDI) will see an increase in their monthly benefits. This adjustment aims to help those who have higher medical expenses.
3. Survivors
Beneficiaries will get extended benefits to include dependents or survivors of deceased wage earners who were eligible for social security payments, increasing their monthly income.. The COLA rise and resulting increase in monthly benefits will impact these beneficiaries as they frequently have low incomes.
4. High-Income Social Security Recipients
Higher-earning beneficiaries may not feel as much of an impact due to some benefits being taxable and subject to earnings thresholds. However, they will still benefit from the increased standard of living adjustment to help combat inflation in areas like healthcare and housing.
CONCLUSION
Social Security disability benefits and additional income for many Americans are set to see a significant COLA increase in 2025. The exact percentage increase is uncertain, but is estimated to be around 3-3. 5%, helping beneficiaries keep up with inflation. It is important for those reliant on Social Security to stay informed about these changes to plan ahead financially.
The Inflation Rate and Its Impact on the Benefits Help to Prepare Better for the Future and Ensure Financial Security After Retirement or Disability.
