Goodbye to cost of living adjustment in 2024: US Government announces changes to checks starting in 2025

The Social Security Administration has confirmed a 2.5% rise in monthly payments with the announcement of the Cost-of-Living Adjustment (COLA) for 2025. Although the goal of this adjustment is to help recipients keep up with inflation, many are dissatisfied because they believe the rise is insufficient to keep up with growing living expenditures.

Social Security benefits, which make up around 30% of retirees’ income, are an essential source of income. However, many people are worried about their financial stability in light of the low COLA hike. This is a summary of the 2025 COLA, its effects, and retirement planning techniques.

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

A brief summary of previous COLA adjustments is provided below:

• 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%

Many recipients contend that the raise is insufficient to keep up with inflation, even with the changes, according to The Motley Fool. According to a recent survey, 31% of retirees believe the 2.5% adjustment is totally insufficient, while 54% feel it is insufficient.

Improving Income Security during retirement

Diversifying sources of income is essential since Social Security benefits alone might not be sufficient to cover living expenditures. Among the sensible choices are:

• 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 Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is used to calculate the COLA, does not accurately represent senior citizens’ spending patterns. The Consumer Price Index for the Elderly (CPI-E) is recommended by experts because it gives more weight to medical expenses, which are a major burden 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.

Relying only on Social Security might not be sufficient to sustain a decent lifestyle in light of inflation and growing living expenses. You may build a more stable and secure retirement by being proactive in fortifying your financial base.

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