Now that we're well into August, many retirees are starting to get antsy over Social Security. Specifically, they're eager to know what cost-of-living adjustment (COLA) they're looking at for 2025.
So far, estimates are pointing to a smaller Social Security COLA in 2025 than in 2024. And that's not what retirees want to hear. But a larger COLA may not do a whole lot of good, either.
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Your 2025 COLA may not help much either way
It's natural to want a larger increase in your income than a smaller one. This holds true whether you're a retiree on Social Security or someone who still works 40 hours a week.
But one thing seniors who keep checking the news for 2025 COLA updates should realize is that no matter what next year's raise comes to, it probably won't be enough to keep pace with rising living costs -- even though that's what COLAs are technically designed to do.
At the start of 2024, Social Security beneficiaries got a 3.2% COLA. But a Motley Fool survey of retirees found that 62% saw this year's COLA as insufficient. And 44% of respondents are now looking to return to work in some form because Social Security just isn't paying them enough to get by.
Now you might attribute these findings to the fact that a 3.2% Social Security COLA isn't all that substantial. But consider this. In October of 2022, the Social Security Administration announced that benefits would be rising 8.7% in 2023. That 8.7% COLA was the largest one to come through in decades.
In spite of that, when the Motley Fool surveyed a group of retirees the following November to see if they were happy with an 8.7% Social Security COLA, 55% said that their raise wasn't enough. This goes to show that even when COLAs are record-breaking, they still manage to let seniors down.
Relying on Social Security COLAs isn't a good plan
If you're someone who's banking on a generous Social Security COLA in 2025, you should know that it's not looking likely. This isn't to say that next year's raise will be the smallest on record. But Social Security recipients shouldn't be anticipating a giant windfall.
If you're retired and want to get to a better place financially, then it's time to stop falling back on Social Security COLAs and instead take matters into your own hands. If you own a home, try renting out a spare room for extra income, or downsize to a smaller space and invest your sale proceeds. If you're capable of working part-time, join the gig economy. You may find that it's a relatively painless way to get your hands on extra money.
Finally, consider relocating if you live in a more expensive area, or if there's a less expensive part of the country that might help you stretch your Social Security benefits further. But either way, don't expect 2025's COLA to improve your financial situation. That's something you're going to have to tackle yourself with the right strategy.
