Millions of seniors today collect monthly benefits from Social Security. And many people rely on those benefits to cover the majority -- or all -- of their retirement expenses.
In recent years, living on Social Security alone has been particularly tough due to rampant inflation. But thankfully, inflation is starting to cool to the point where the Federal Reserve is finally talking about interest-rate cuts, and prices are starting to moderate.
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But while a slower pace of inflation is a good thing for seniors on Social Security, it could also have a less desirable consequence -- a stingy cost-of-living adjustment (COLA) for 2025.
If you're curious to know what next year's Social Security raise will amount to, you should mark your calendar for Oct. 10. That's when the Social Security Administration (SSA) is expected to make an official 2025 COLA announcement. But it's also important to prepare for the fact that next year's Social Security COLA is likely to come in lower than 2024's unless inflation takes an unexpected turn in September.
What we know about the 2025 Social Security COLA so far
Social Security COLAs are based on third-quarter inflation data, which explains why we don't have an official number just yet. We need to wait for September's Consumer Price Index reading to become available, and that won't happen until Oct. 10.
However, based on recent inflation data, there are estimates of what next year's Social Security COLA could look like. The nonpartisan group The Senior Citizens League (TSCL) is projecting a 2025 COLA of 2.57%. That's considerably lower than the 3.2% raise seniors on Social Security received this past January.
But again, inflation was also higher in late 2023 than it's been in recent months. So while a smaller 2025 COLA may be disappointing, it also makes sense.
Of course, there's room for that 2.57% projection to wiggle, based on incoming inflation data. But based on how things have been trending, that number is more likely to shift downward than upward.
Take action once an official announcement hits
You can check the SSA's website on Oct. 10 for news of your 2025 COLA. At that time the SSA should also release other updated numbers, like the earnings-test limit for 2025, the maximum monthly benefit, and the wage cap for Social Security tax purposes.
If 2025's COLA worries you, then you'll want to take action before the start of the new year. Specifically, if you think you'll struggle to pay your bills in 2025, you should assess your spending and see if there's any room to cut corners. You may also want to consider relocating somewhere less expensive to stretch your benefits further.
If you have a larger home that's costly to maintain, downsizing could be another big money-saver. And if you're already living as frugally as you can bear to and you don't want to move (or don't think it's feasible), see if it's possible to pick up some occasional gig work. If you're able to earn an extra $100 to $200 a month, that could easily make up for a smaller Social Security COLA.
At this point, you don't have to wait much longer to see what your 2025 Social Security raise will come to. But you may want to brace for a lower number than you've seen in recent years.
