Retirees can prepare now that the new cost of living adjustment (COLA) for 2025 has been formally announced. The Social Security Administration (SSA) will include this increase in next year’s Social Security payouts.
Since Social Security accounts for almost 30% of the income of Americans aged 66 and over, it is crucial for the majority of retirees.According to SSA, 15% of women and 12% of men over 65 rely on Social Security for 90% or more of their income.
The ability of Social Security to adjust payouts in accordance with the cost of living is one of its many wonderful features. As prices rise, this helps retirees maintain their spending power. However, there wasn’t much excitement when the most recent COLA was revealed.
When Will Social Security Issue the First payments with the COLA Increase?
On January 3rd, the monthly benefits will increase. For the millions of Americans who rely on Social Security to cover their expenses, this COLA boost is crucial news. The new COLA for 2025 is set at 2.5 percent, which is extremely near to the 2.6% average yearly increase over the previous 20 years. Here are a few of the most recent COLAs for Social Security:
- 2023: 8.7%
- 2024: 3.2%
- 2025: 2.5%
Beneficiaries should take note of this development since it may significantly impact their financial security and quality of life.
Keep in mind that for retirees who rely on their benefits, adjustments to the Cost-of-Living Adjustments (COLA) can have a significant impact.
Over time, these COLA increments have undergone significant alteration. Here’s a little glance at how these adjustments have performed:
Annual COLA Increases
- 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%
Given that a 2.5% increase appears like a modest amount, it is not surprising that many of the people who are meant to gain from these increases are disappointed. 31% of retirees believe the adjustment is totally inadequate, while 54% believe it is insufficient. The Motley Fool just conducted a poll that supports this.
Given that the average monthly retirement benefit in September was $1,922, or little more than $23,000 annually, it is simple to see why. This sum would only increase by 2.5% to $23,641, or an additional $577 annually, or roughly $48 each month.
The Need for a More Accurate Inflation Measure
Unless adjustments are adjusted to reflect a more realistic assessment of inflation, people are likely to remain dissatisfied with COLA. The Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, is currently the basis for the adjustments.
This indicator mostly displays the spending patterns of the working class. However, the Consumer Price Index for the Elderly (CPI-E) may provide a more realistic view of how elders spend their money, particularly when it comes to medical care, where costs have increased more than typical.
Are you considering ways to increase your retirement savings without becoming overly dependent on Social Security? Although a prosperous career may result in larger Social Security benefits, these typically fall short of covering all of your expenses.
Therefore, it is crucial to make wise retirement plans. One sensible strategy to ensure you will have adequate money in retirement is to set up multiple sources of income.
Create Multiple Income Streams for Retirement
A solid retirement plan should include both aggressive savings and wise investing. First, estimate the amount of money you will require for retirement. Then, make a plan to get it. Consider these potential sources of income:
- Part-time work before fully retiring
- Social Security benefits
- Stock dividend income
- Rental income from properties you own
- Income from pension plans
- Retirement income from previous employment for you and/or your spouse
- Selling stocks from your portfolio if necessary
- Interest income from investments such as bonds, CDs, and bank accounts
- Inheritance
Explore Additional Revenue Opportunities
Think outside the box to uncover more revenue options. Think about potential outcomes such as:
- Cashing out a life insurance policy
- Securing a reverse mortgage
- Renting out part of your property
Putting off retirement for a few years can also give you a lot more money to spend. No matter what you do, your goal of paying for most of your retirement on your own is a good one.
Spend time making a strong plan and making sure it gets carried out well. Keep in mind that Social Security probably won t cover most of your costs in retirement, and you wouldn t want it to.
Read Also :-Here s when the Federal Government will send the largest SSI benefit payment so far
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