The Cost-of-Living Adjustment (COLA) for 2025 has been announced by the Social Security Administration (SSA), confirming a 2.5% increase in monthly benefits. While this adjustment is meant to help beneficiaries keep up with inflation, many are disappointed, feeling the increase falls short of covering rising living expenses.

For retirees, Social Security benefits are a crucial source of income, providing around 30% of their earnings. However, the modest COLA increase leaves many concerned about their financial stability. Here’s an overview of the COLA for 2025, its implications, and strategies to secure your retirement.

Cost of Living Information (COLA) for 2025

• The 2025 COLA is set at 2.5%, slightly below the 20-year average of 2.6%.
• The new increase will take effect starting January 1, 2025.
• A retiree receiving the average monthly benefit of $1,922 will see a $48 monthly increase, or approximately $577 annually.

Historical Cola increases

Here’s a quick overview of past COLA adjustments:

• 2015: 1.70%
• 2016: 0%
• 2017: 0.30%
• 2018: 2%
• 2019: 2.80%
• 2020: 1.60%
• 2021: 1.30%
• 2022: 5.90%
• 2023: 8.70%
• 2024: 3.20%

According The Motley Fool, despite the adjustments, many beneficiaries argue that the increase is not enough to keep up with inflation. A recent survey revealed that 54% of retirees feel the 2.5% adjustment is inadequate, with 31% deeming it completely insufficient.

Improving Income Security during retirement

Since Social Security benefits alone may not fully cover living expenses, diversifying income sources is vital. Some practical options include:

• Working part-time to supplement income while staying active.
• Investing in stocks, bonds, or mutual funds for additional returns.
• Earning rental income from owned properties.
• Using savings accounts or certificates of deposit (CDs) for steady returns.
• Leveraging employer pensions if available.
• Considering reverse mortgages for additional liquidity.

Challenges of cola calculations

The COLA is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which does not fully reflect the spending habits of seniors. Experts advocate for using the Consumer Price Index for the Elderly (CPI-E), which places greater emphasis on medical costs, a significant expense for retirees.

Tips to manage financial challenges

• Evaluate your spending and identify areas to cut back, such as switching to more affordable services or downsizing your home.
• Explore opportunities for additional income through freelance or part-time work.
• Plan strategically by maximizing savings and diversifying income streams to ensure long-term financial stability.

With inflation and living costs rising, relying solely on Social Security

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may not be enough to maintain a comfortable lifestyle. By taking proactive steps to strengthen your financial foundation, you can create a more secure and stable retirement.