Social Security’s cost-of-living increase may fall short for some retirees

Pensacola, Florida, is a sunny place where 82-year-old Sherri Myers is having trouble with her money. The cost-of-living increase (COLA) she’s supposed to get from Social Security in January doesn’t look like it will help her finances much. She thinks about how hard it is to pay for her daily needs and says, “It won’t make a dent.”

“Inflation has eaten up my savings,” Sherri says, expressing a worry that many retirees share. She is in a tough spot because she doesn’t have any extra money to fall back on. Even though Sherri is expecting her COLA, she is actively looking for work to add to her income, which is currently made up of a small pension and her Social Security payments.

Impact of the Social Security COLA Increase

Maximum Social Security benefit payment for workers at Full Retirement Age after the 2025 COLA increase

About 70.6 million people who get Social Security are expecting a smaller cost-of-living increase in 2025 than in past years. This change is being made because inflation is starting to slow down. The official COLA announcement from the Social Security Administration is set to happen on Thursday. Analysts expect a small raise of about 2%.

• Like Sherri, a lot of seniors are worried that the COLA won’t be enough to keep up with rising costs of living.
• Savings have been greatly reduced by inflation, leaving retirees with fewer financial safety nets.
• For many seniors, the need to find extra ways to make money is becoming a fact.

As seniors deal with these money problems, the discussion about how well the changes to Social Security work is still very important.

In 2025, Social Security payments will likely go up by a small 5%. In the years before, recipients saw a 3.2% rise in 2024, following an 8.7% increase in 2023. This was because inflation rates were the highest they had been in 40 years.

The Financial Challenge Ahead

SSDI Update: New Social Security Disability Thresholds After the 2025 COLA

As of January 2025, the AARP thinks that a 2.5% Cost of Living Adjustment (COLA) will raise the average retiree’s monthly benefit by $48, taking their total to about $1,920.

“I think a lot of seniors are going to say that this is not really enough to keep up with prices,” says Bill Sweeney, Senior Vice President of Government Affairs for AARP. In spite of this, he points out a positive: the change shows that inflation is slowing down.

The announcement comes at a very important time because the national social security plan is about to face a big financial problem.

Here’s How Much the 2025 Social Security Cost-of-Living Adjustment (COLA) Will Boost Maximum Benefit

The yearly report from the trustees of Social Security and Medicare, which came out in May, says that the program’s trust fund might not be able to keep up with full benefit payments starting in 2035. The government could only pay 83% of planned benefits if its funds ran out.

Funding Social Security

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Payroll taxes paid by workers and companies are the main source of money for Social Security. The most money that was taxed under these rules went up from $160,200 in 2023 to $168,600 in 2024. This amount is expected to go up to $174,900 in 2025, according to analysts.

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