Social Security benefits are set to receive a cost-of-living adjustment (COLA) in 2025, but the increase may not be enough to address the financial concerns of many retirees. The COLA is projected to be around 2.6%, which is below the 10-year average of 2.75% and the smallest raise since 2021. This adjustment comes at a time when retirees are already facing significant challenges.
A 2023 survey from the Employee Benefit Research Institute (EBRI) found that confidence in the ability to live comfortably through retirement had decreased significantly, with 55% of retirees surveyed in 2024 worried they will need to make substantial spending cuts. The Social Security Administration cannot finalize the 2025 COLA until third-quarter inflation data is released in early October, but the current estimate raises concerns among retirees. Some experts argue that the method of calculating COLAs should be revised to better reflect the spending patterns of retirees, who often spend more on housing and healthcare compared to the general population.
Spouses who qualify for Social Security benefits based on their partner’s earnings will also receive the COLA adjustment.
colA impacts on retiree finances
However, since spousal benefits are typically lower than retirement benefits, the dollar amount increase will be smaller.
For example, with a projected 2.63% COLA, the average retired worker receiving $1,918 per month as of June 2024 would see an increase of about $50 per month, while those receiving spousal benefits, averaging $911 per month, can expect an increase of approximately $24 per month. It’s important to note that the actual monthly benefit may differ from the projected increase due to factors such as claiming age and Medicare premiums. Beneficiaries should start planning their budgets now, even before the official announcement, and consider other income sources if the COLA is insufficient to cover living expenses.
The anticipated changes to Social Security checks in 2025 will impact retirees’ incomes, with the COLA adjustment intended to help beneficiaries keep up with inflation. However, many seniors continue to report struggling with rising costs, particularly in areas like food and housing. While the official COLA percentage will be confirmed later this year, retirees should brace for another year of potentially inadequate adjustments to their benefits and plan accordingly to ensure their financial stability in retirement.
