October is always an important month for seniors on Social Security. The reason? It’s the month when the Social Security Administration announces which cost-of-living adjustment (COLA) recipients will notice in the coming year.
In 2023, seniors on Social Security received a whopping 8.7% COLA – the largest in decades. But this year’s COLA was a relative disappointment at just 3.2%.
Given that inflation has been frustratingly persistent, many Social Security recipients today are eager to know how much their monthly benefits will increase in 2025. And based on recent inflation data, a new estimate is available. But it may not be a number worth writing home about.
A slight improvement compared to previous figures
Earlier this year, the nonpartisan Senior Citizens League projected a COLA of 1.75% for 2025. The group then increased that number to 2.6%.
In mid-May, following new inflation data, the Senior Citizens League slightly raised its Social Security COLA estimate for 2025 to 2.66%. That’s an improvement over the 1.75%, but it can be read as a disappointment in light of more recent COLAs.
Of course, the 2.66% figure is just an estimate, and we won’t have an official figure until the third quarter inflation data becomes available (which explains why COLA announcements always occur in October). But still, it can be helpful to have an estimate for financial planning purposes, especially if you’re someone who gets most of your retirement income from Social Security.
It’s best not to rely on a generous Social Security COLA
Regardless of what Social Security’s COLA will be for 2025, it’s best to put yourself in a position where you’re not as dependent on it. Of course, if you’re already retired and get most of your income from Social Security, that’s easier said than done.
But one thing you can consider in that situation is joining the gig economy to generate some extra income. If you can take home an extra $100 a week, perhaps by working shifts at a local farmer’s market or driving passengers around town in your car, you may not have to worry so much about the Social Security boost you’ll get. .
In the meantime, if you’re still working, one of the best things you can do for retirement is build up savings so you’re not too dependent on Social Security to begin with. If you put yourself in a position where you can get as much income or more from your savings as what Social Security pays you, then it may not matter whether your COLA in any given year is 2.74% versus 2.93% versus is 3.14%. .
Another thing to keep in mind is that even if Social Security COLAs are more robust, they don’t necessarily do a good job of helping beneficiaries maintain their purchasing power. A Motley Fool poll conducted in late 2022, following the announcement of an 8.7% COLA for 2023, found that more than 50% of respondents were unhappy with their raise because they felt it was not enough to cover their expenses to cover.
All things considered, it will be a while before an official Social Security COLA is announced. For now, you can keep an eye on the 2025 estimates to know what to expect. But also take steps to improve your retirement income, because even that 2.66% projection could drop between now and October.
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Social Security’s 2025 COLA forecast just improved. Here’s the latest estimate, originally published by The Motley Fool
