If you’re feeling anxious about next year’s increase, consider making some adjustments.
Many people are wondering how much Social Security benefits will increase next year as the official 2025 cost-of-living adjustment (COLA) approaches.
Social Security COLAs are intended to help recipients maintain their purchasing power in the face of rising living costs due to inflation. In early 2024, Social Security benefits increased by 3.2%. However, preliminary projections suggest that the 2025 COLA could be less generous.
Early estimates indicate a 2.5% COLA for 2025, but this figure may decrease if September’s inflation figures (which are yet to be released) come in lower than anticipated.
If you’re concerned that a smaller Social Security COLA will negatively impact your finances, it’s important to recognize that this might be a good time to rethink your financial strategy for retirement.
Don’t depend solely on Social Security COLAs
Historically, Social Security COLAs have struggled to keep pace with actual inflation, making reliance on them unwise. If you find yourself in this situation, it may be essential to consider significant changes.
While these changes may be difficult to implement, considering them could ease financial stress in the long run, especially if you are living paycheck to paycheck with Social Security as your sole income source.
Start by reviewing your expenses and identifying areas to save. The solutions might not be immediately evident, but you could discover that downsizing to a more affordable home is a possibility. If you rent, consider reducing your living space to lower your monthly rent.
Think also about your location. Social Security payments remain consistent regardless of where you live. While some states tax Social Security, they often offer exemptions for lower-income groups, which you likely fit into if that’s your primary source of income. Moving to an area with a less expensive cost of living could maximize your benefits.
Finally, honestly assess your capability to work. Some seniors may have health limitations that hinder employment, but if that’s not your case, consider whether working a few hours weekly might be preferable to cutting back on essentials like food or medication.
Also, keep in mind that today’s job landscape offers flexible options beyond traditional roles. You might explore side gigs like selling homemade goods at farmers’ markets, offering childcare occasionally, or driving for hire.
Breaking the cycle of financial worry
The Social Security Administration will release the official COLA amount for 2025 on October 10. If this figure significantly impacts your finances, that could be a cause for concern. Thus, regardless of what next year’s COLA turns out to be, consider implementing the above changes if you’re tired of the constant financial anxiety.
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