The majority of seniors are aware that an annual automatic cost-of-living adjustment (COLA) is part of their Social Security income. COLAs are not meant to raise benefits; rather, they are meant to help them maintain purchasing power and keep up with inflation.

Experts caution beneficiaries against depending entirely on benefits to cover their retirement expenses for this reason. Benefits were never supposed to take the place of a wage; rather, they were supposed to cover about 40% of costs.

Even still, a lot of seniors depend on their Social Security benefits to get by, and many are worried about how they will manage in the new year given this year’s 2.5% rise.

The impact of a low COLA on retirees Social Security benefits

The boost helps with costs like Medicare for people who depend on Social Security in one way or another. The average monthly Social Security income in 2024 increases to $1,976 in 2025 after the 2.5% COLA is included.

In addition to the previously announced Medicare Part B premium increase (the standard monthly cost for Part B is $174.70, but it will climb to $185 in 2025), this $49 increase only leaves recipients with an additional $39 per month to cover expenses.

Not all beneficiaries will profit equally from this; those with larger cheques will get more, while those with smaller payouts would get less. Since Social Security eligibility starts at age 62 and Medicare eligibility doesn’t start until age 65, some beneficiaries aren’t even eligible for Medicare, thus this situation doesn’t apply to them.

The 2.5% increase will not be enough for most people to cover the increase in expenses they experienced in 2024, when inflation exceeded the COLA in the first half of the year, let alone make up for some of the savings they used to cover the difference in their expected expenses, regardless of the increase and the services you have enrolled in.

How to make up for a minimal increase

It’s simple to suggest, “Just get a higher salary or a different job that pays better, or just move,” while you’re a regular employee, but as you age, things might grow more complicated. The fundamentals stay the same, and even while some lifestyle adjustments can be challenging, the better financial circumstances might make the sacrifice worthwhile.

Moving to a less costly area of the country is the most efficient approach to improve your disposable income with the least amount of work because benefits are determined by your record rather than your residence.

Although leaving friends and family can be challenging, the sooner you establish yourself, the better, since you can create a network of support if needed. This has the added benefit of providing you with additional income from the sale of a house in a higher cost of living area, as well as passive income from rental.

Even if you live in the same city, you can sell your house and downsize or rent it out. It may be tempting to keep the house, but consider how much of your income will be spent on it and whether there are other options available that would better suit your lifestyle. A smaller house is also simpler to heat, cool, and clean.

As a last resort, if you are fit enough, consider returning to work with part-time jobs that offer flexibility. It doesn t have to be a high-pressure job or even in your field, but it would provide extra income and some contact with other people, which could help you avoid isolation.

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