October is always a big month for seniors on Social Security. The reason? It’s the month when the Social Security Administration announces what cost-of-living adjustment, or COLA, recipients will be privy to in the coming year.
In 2023, seniors on Social Security received a whopping 8.7% COLA — the largest to arrive in decades. But this year’s COLA was a relative disappointment at just 3.2%.
Given that inflation has been frustratingly persistent, many Social Security recipients today are eager to know how much their monthly benefits will increase in 2025. And based on recent inflation data, there’s a new estimate available. But it may not be a number worth writing home about.
A slight improvement from previous numbers
Earlier this year, the nonpartisan Senior Citizens League projected a 1.75% COLA for 2025. The group then increased that number to 2.6%.
In mid-May, following fresh inflation data, the Senior Citizens League upped its 2025 Social Security COLA estimate ever so slightly to 2.66%. That’s an improvement from 1.75%, but it may read as a disappointment in light of more recent COLAs.
Of course, that 2.66% is only an estimate, and we won’t have an official number until third quarter inflation data becomes available (which explains why COLA announcements always happen in October). But still, it can be helpful to have an estimate for financial planning purposes — especially if you’re someone who gets most of your retirement income from Social Security.
It’s best not to bank on a generous Social Security COLA
Regardless of what 2025’s Social Security COLA turns out to be, it’s best to put yourself in a position where you’re not so reliant on it. Of course, if you’re already retired and get the bulk of your income from Social Security, that’s easier said than done.
But one thing you can consider in that situation is joining the gig economy to generate some additional earnings. If you’re able to bring home an extra $100 a week, whether by working shifts at a local farmers market or driving passengers around town in your car, you may not have to worry as much about the Social Security raise you get.
Meanwhile, if you’re still working, one of the best things you can do for your retirement is build savings so you’re not overly reliant on Social Security to begin with. If you put yourself in a position where you’re able to get as much income or more from your savings as what Social Security pays you, then it may not matter whether your COLA in a given year is 2.74% versus 2.93% versus 3.14%.
Another thing to keep in mind is that even when Social Security’s COLAs are more robust, they don’t necessarily do a good job of helping beneficiaries maintain buying power. A Motley Fool survey conducted in late 2022, following that 8.7% COLA announcement for 2023, found that more than 50% of respondents weren’t happy with their raise because they felt it wasn’t sufficient in helping them cover their expenses.
All told, it’ll be a while until an official Social Security COLA is announced. For now, you can keep tabs on 2025 estimates to know what to expect. But also take steps to improve your retirement income picture, because even that 2.66% projection has the potential to drop between now and October.
