2025 Social Security COLA: Concerns and Strategies
The 2025 Social Security COLA is projected at 2.57%, raising concerns among seniors about their financial security.
Navigating the Future: Understanding the 2025 Social Security COLA and Its Implications
As June 2024 draws nearer, nearly 68 million Americans rely upon social security benefits, potentially with many using them as an only or primary income in their senior years. The Social Security Administration regularly adjusts these benefits for inflation, using a cost-of-living adjustment to provide for general increases in living costs. However, the 2025 COLA is expected to be 2.57%, slightly lower than the previous year’s, and seniors are understandably concerned about future viability of potentially inadequate payouts in a time of fluctuating inflation.
Understanding COLA Implementation
The COLA is usually directly proportional to the difference between the third quarter of the previous year and the third quarter of the current year of the consumer price index for Urban Wage Earners and Clerical Workers. This has been true since a COLA amendment was included in the 1972 Social Security Amendments, and the first COLA implemented by this system was in 1975. However, according to research, while these changes in payouts are fairly technical, the impact on seniors’ purchasing power may be vastly any of these changes, particularly in healthcare services that have gone up in price much faster than the general inflation rate.
Challenges for Retirees
The National Institute on Retirement Security found that 87% of American seniors are worried by the rising costs of living. In addition, over 66% are worried that they will be unable to afford needed healthcare services because it will be too expensive. These numbers will only worsen if the COLA will not match the actual rise in the cost of living, such as housing costs and medical services, which have gone up significantly higher than the general inflation rater.
Ways to Adapt to Reduced Increases
For seniors worried that a potentially lower COLA will cut into the amount of money they have to stretch until next year, multiple approaches may be considered. First, careful budgeting can provide a clear picture of which expenses are mandatory or otherwise required and which ones are optional. Secondly, both purchasing and insurance prices should be recosted when possible if they turn out too expensive. Thirdly, the cost of living varies widely from one part of the country to another, and potentially moving from a more to a less expensive region is a valid way to free up some monetary resources.
