Social Security COLA Projections for 2025: What Seniors Should Expect
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October is always a significant month for seniors relying on Social Security. This is when the Social Security Administration announces the cost-of-living adjustment (COLA) for the coming year.
In 2023, Social Security beneficiaries received a substantial 8.7% COLA, the largest in decades. However, this year’s adjustment was a relatively modest 3.2%, leaving many recipients hoping for a more substantial increase in 2025. Based on recent inflation data, a new estimate has emerged, but it may not meet everyone’s expectations.
New Estimate Shows Slight Improvement
Earlier this year, the nonpartisan Senior Citizens League projected a 1.75% COLA for 2025. This estimate was later revised to 2.6%, and in mid-May, following updated inflation data, the League adjusted it slightly to 2.66%. While this is an improvement from the initial projection, it may still be disappointing compared to recent COLAs.
It’s important to remember that this 2.66% figure is only an estimate. The official COLA will be determined based on third-quarter inflation data, explaining why announcements are made in October. Nonetheless, having an estimate can be helpful for financial planning, especially for those heavily dependent on Social Security for their retirement income.
Preparing for a Modest COLA
Regardless of the final COLA for 2025, it’s wise not to rely too heavily on a generous increase. If you are already retired and depend significantly on Social Security, consider supplementing your income through the gig economy. Even earning an extra $100 a week from a part-time job can reduce your reliance on Social Security raises.
For those still working, the best strategy is to build substantial savings. This way, you won’t be overly dependent on Social Security benefits. Aim to generate as much income from your savings as you do from Social Security, making the exact COLA percentage less critical to your financial stability.
The Reality of Social Security COLAs
Even significant COLAs may not fully compensate for the rising cost of living. A survey by The Motley Fool in late 2022 found that over 50% of respondents were dissatisfied with the 8.7% COLA for 2023, feeling it was insufficient to cover their expenses.
Planning for the Future
While it will be a few months before the official 2025 COLA is announced, keeping an eye on estimates can help manage expectations. However, it’s equally important to take proactive steps to improve your retirement income, as the projected 2.66% increase could still change before October.
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