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Social Security COLA Projections for 2025: What Seniors Should Expect

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Social Security COLA Projections for 2025: What Seniors Should Expect

October is always an important month for seniors who depend on Social Security. That’s when the Social Security Administration announces the cost of living adjustment (COLA) for next year.

In 2023, Social Security beneficiaries received a substantial COLA of 8.7%, the largest in decades. However, this year’s adjustment was a relatively modest 3.2%, leaving many beneficiaries expecting a more substantial increase in 2025. Based on recent inflation data, a new estimate has emerged, but it is possible no meet everyone’s expectations.

New estimate shows slight improvement

Earlier this year, the nonpartisan Senior Citizens League projected a COLA of 1.75% by 2025. This estimate was later revised to 2.6%, and in mid-May, following updated inflation data, the League adjusted it slightly to 2.66%. While this is an improvement over the initial projection, it may still be disappointing compared to recent COLAs.

It is important to remember that this 2.66% figure is only an estimate. The official COLA will be determined based on third quarter inflation data, which explains why the announcements are made in October. However, having an estimate can be helpful for financial planning, especially for those who rely heavily on Social Security for their retirement income.

Preparing for a modest COLA

Regardless of the final COLA for 2025, it is advisable not to rely too much on a generous increase. If you’re already retired and rely significantly on Social Security, consider supplementing your income through the gig economy. Even earning an extra $100 a week with a part-time job can reduce your dependence on Social Security increases.

For those still working, the best strategy is to generate substantial savings. This way, you won’t be overly dependent on Social Security benefits. Try to generate as much income from your savings as you do from Social Security, making the exact COLA percentage less critical to your financial stability.

The reality of Social Security COLAs

Even significant COLAs may not fully offset the increased cost of living. A survey conducted by The Motley Fool in late 2022 found that more than 50% of respondents were dissatisfied with the 8.7% COLA for 2023, feeling it was insufficient to cover their expenses.

Planning for the future

Although it will be a few months before Official COLA 2025 announced, keeping an eye on estimates can help manage expectations. However, it’s equally important to take proactive steps to improve your retirement income, as the projected 2.66% increase could still change before October.

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