In 2025, the typical retired pair can expect a boost in their Social Security advantages.
In 2025, the typical retired pair can expect a boost in their Social Security advantages.
In 2024, the typical pair receiving Social Security benefits takes home around $3,014 per month, adding up to over $36,000 annually. Although this is a substantial sum, it might not be sufficient to cover most retiree couples' expenses, considering the high inflation in recent years.
Luckily, inflation has started to subside, resulting in a smaller cost-of-living adjustment (COLA) for the upcoming year. As the first of these new payments is just around the corner, it's essential to comprehend the specific increase to prepare your budget accordingly for 2025.
The 2025 Social Security COLA is 2.5%
The 2.5% hike in COLA is expected for 2025. This figure is lower than the 3.2% boost beneficiaries received in 2024 and significantly less than the 8.7% increase in 2023. This decrease is due to the slowing inflation, which has led to a decrease in the rate at which the cost of goods is rising.
The average couple's Social Security benefit amount will increase from $3,014 to $3,089 in 2025, which translates to an extra $75 per month and $900 annually. Although it represents a significant improvement over the average increase of $49 for single retired workers in 2025, it might still fall short of your financial needs.
Remember that the COLA is determined based on a percentage of your existing benefit. If the benefits you're currently receiving exceed the $3,014 average benefit in 2024, you can anticipate a more significant increase in 2025.
To get a rough estimate of your 2025 benefits, simply multiply your 2024 benefits by 2.5%. The Social Security Administration will also send you a personalized COLA notice directly by mail in December, providing your specific benefit amount for next year. If you've set up a my Social Security account, you'll be able to access this notice through your Message Center starting in early December.
The government will deliver the first checks with the enhanced COLA amount in January 2025. The precise payment date is determined by your birthdate:
- If you were born between January 1 and 10, your payment will arrive on the 8th of January in 2025.
- If you were born between January 11 and 20, your payout will happen on the 15th of January in 2025.
- If you were born between January 21 and 31, your payment will be disbursed on the 22nd of January in 2025.
If you have any queries regarding your COLA, contact the Social Security Administration. However, wait until you receive your COLA notice in December to ensure you have all the necessary information.
What if the COLA isn't sufficient?
While COLAs are meant to preserve Social Security's purchasing power, this isn't always the case in practice. Since 2010, benefits have lost about 20% of their purchasing power, as determined by The Senior Citizens League (TSCL).
Many suggest that the government should change how it calculates COLAs to halt this loss of purchasing power. However, as of now, the government has shown no intentions of addressing this issue. It is up to retirees to devise strategies for making ends meet. If you have substantial savings to supplement your checks, this may not be a significant challenge.
If your savings are limited, you might need to make difficult choices. This could involve:
- Scaling back on spending when possible
- Picking up part-time or full-time work to supplement your checks
- Postponing retirement, if you're still employed
- Exploring government assistance programs
These alternatives might not be enjoyable, but they could be crucial for surviving financially in 2025. If you believe you may need to employ one or more of these solutions, start planning early. Estimate the extent of your expected shortage in 2025 and decide on the most suitable method to secure the extra funds you need. Delaying your financial planning until 2025 could leave you in a precarious financial situation.
In light of the 2.5% COLA increase for 2025, retirees might need to adjust their budgets accordingly, as the additional $75 per month and $900 annually may not fully cover their financial needs. If the COLA isn't sufficient, retirees may need to consider cutting expenses, taking on part-time work, delaying retirement, or exploring government assistance programs to make ends meet.