The 2025 Social Security COLA Is a Good News/Bad News Situation for Retirees – MASHAHER

ISLAM GAMAL20 June 2024Last Update :
The 2025 Social Security COLA Is a Good News/Bad News Situation for Retirees – MASHAHER


If you’re a salaried worker, you probably find yourself getting a bit antsy toward the end of the year if that’s when raises are typically announced at your workplace. Similarly, many Social Security recipients are already eager to know what their 2025 cost-of-living adjustment, or COLA, will amount to.

Social Security benefits are eligible for an annual COLA to help seniors maintain their buying power as inflation drives the cost of living upward. In 2024, Social Security recipients saw their benefits increase 3.2% from the previous year. And beneficiaries might be hoping for at least an equally large boost in 2025.

Social Security cards.

Image source: Getty Images.

Unfortunately, based on the data available so far, it doesn’t look like the 2025 COLA will be as generous as the 2024 version. In fact, next year’s COLA projection just decreased a bit from previous estimates. But that’s actually not such a terrible thing.

The latest number

In May, the nonpartisan Senior Citizens League projected that Social Security recipients would get a 2.66% COLA in 2025. But more recently, the group adjusted its projection to 2.57% based on the most recent data from the Consumer Price Index (CPI), which measures changes in the cost of consumer goods and services. Social Security COLAs are calculated based on changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a subset of the CPI.

Now at first, that modest but notable adjustment might seem like bad news. After all, if you’re collecting Social Security, you’re apt to want to see your monthly benefits rise as much as possible.

But do remember that a smaller Social Security COLA is an indication of cooling inflation. So while you might be looking at a slightly less-generous raise, it means you could also be in line for more relief at places like the supermarket and gas station. All told, things should even out.

An official COLA comes out in October — but you might want to make some changes sooner

It’s important to remember that any COLA estimate you see in the coming months is just that: a guess. Social Security COLAs are calculated based on third-quarter data from the CPI-W. Since that data won’t be available until October, seniors will have to wait until then for an official announcement.

However, it’s probably fair to plan on a smaller COLA in 2025 than what came through in 2024. And again, that’s not a bad thing because it also means inflation is easing.

Of course, in an ideal world, you’re not someone who’s incredibly reliant on a specific COLA to make ends meet. But if you are in that boat, you might want to get strategic about your retirement finances to get to a better place.

One option to look at is downsizing so you’re spending less money on a home. You could also consider relocating to a part of the country where your Social Security benefits are more easily stretched.

Furthermore, the gig economy has really changed the face of working during retirement. So if money is tight enough that you’re reliant on a Social Security COLA to stay afloat, consider working a few hours a week, whether that means driving for a ride-hailing service, caring for pets, or delivering food at your convenience.

It’s a great thing that Social Security benefits are eligible for COLAs every year. But there have been years when recipients got no increase after inflation declined or remained flat. So a COLA is really never something you want to bank on too heavily. And if your financial situation is such that you do, it’s time to make at least one notable change.

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The 2025 Social Security COLA Is a Good News/Bad News Situation for Retirees was originally published by The Motley Fool


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