If Dissatisfied with the 2.5% Social Security Cost-of-Living Adjustment (COLA) Predicted for 2025, Consider This Record-Low Increase for Comparison
If Dissatisfied with the 2.5% Social Security Cost-of-Living Adjustment (COLA) Predicted for 2025, Consider This Record-Low Increase for Comparison
If you're one of the numerous elderly Americans who heavily depend on Social Security for a comfortable retirement, you might be dismayed that your benefits are set to increase by a mere 2.5% in January. This tiny boost in your monthly income might leave you feeling less than satisfied.
However, when we delve into past data, it becomes evident that a 2.5% increase in Social Security benefits, or a Social Security Cost-of-Living Adjustment (COLA), isn't all that dismal. In fact, it's considerably more generous than some of the COLAs beneficiaries have experienced in the past.
The scenario might have taken a turn for the worse
In 2024, Social Security benefits experienced a rise of 3.2%. The year before saw a significant increase of 8.7%. Even more recently, a 5.9% COLA was introduced in 2022.
Given these figures, a 2.5% COLA for 2025 might appear as a slap in the face. But it's essential to consider that these recent COLAs were primarily driven by a period of high inflation.
The reason the 2025 Social Security COLA is projected to be much smaller is that inflation has thankfully decreased significantly over the past year. As a result, seniors may suffer less from higher costs on their essential expenses due to the more modest COLA.
Moreover, a 2.5% increase in Social Security benefits certainly isn't the most dismal scenario as far as COLAs are concerned. There have been three instances - in 2010, 2011, and 2016 - where Social Security beneficiaries received a zero percent COLA. And as recently as 2021, Social Security COLA was only 1.3%. So while a 2.5% COLA may not exactly be reason to celebrate, it's also not a catastrophically low increase.
Earning more from your Social Security
If you find yourself struggling to make ends meet despite the 2.5% increase, it might be wise to take proactive steps in improving your finances. Begin by reevaluating your expenses. Is it necessary to maintain car ownership when public transportation is readily available and you have neighbors with vehicles that you could potentially borrow or get rides from? Can you downsize your home to a smaller, less expensive property to save on maintenance costs?
Following that, consider your potential income sources. You might assume that being retired for an extended period makes it challenging to reenter the workforce. However, there may be opportunities to consult in your former field, especially if you possess specific skills or have kept up with industry changes. The gig economy is another option, open to individuals of all ages and stages in their career.
Though a larger boost from Social Security might be what you're longing for, it's also crucial to keep the upcoming increase in perspective and take initiative to bridge any potential financial shortfalls.
Despite the 2.5% increase in Social Security benefits being less than satisfactory for some retirees, it's important to remember that a zero or low COLA has occurred in the past, such as in 2010, 2011, and 2016. Furthermore, if you're finding it hard to make ends meet with the 2.5% increase, exploring ways to reduce expenses and seek additional income sources, like consulting in your field or participating in the gig economy, could be beneficial for your retirement finance management.