In the US, Social Security retirees look forward to hearing about the cost-of-living adjustment (COLA) increase every year. This keeps their benefits in line with inflation.
This is what the Social Security Administration (SSA) said: the COLA will be 2.5% in 2025. It may seem like a small rise compared to the big ones in the past—3.2% in 2024 and 8.7% in 2023—but it is not necessarily bad news.
Knowing the connection between COLA and inflation helps put why a smaller change might be good into perspective. Prices in the market are stabilizing, which could mean that basic living costs are going down.
This is something that beneficiaries should think about when they are figuring out how this 2.5% increase will affect their day-to-day finances.
Why a smaller COLA is not such a bad thing
The cost-of-living adjustment (COLA) in Social Security is meant to keep up with inflation. This means that when prices go up, so do payments.
A 2.5% rise in 2025 may not seem like much compared to rises in past years, but it could be a sign of good things to come. Inflation is under control, which means that prices of basic things like food and gas are not going up as quickly in response to this moderate rise.
A lower COLA could be good because it means that living costs are not going up at an insanely fast rate. This could help people keep more of their money to spend.
Instead of seeing the change as a loss, it is better to see it as a sign of stable economic conditions where prices are rising less quickly, which helps retirees better control their money.
For instance, a bigger COLA might look like it would be good in the short term, but it would actually mean higher inflation and higher asset costs.
Even if the COLA goes up, seniors would still be worse off if prices rise faster. In conclusion, the 2.5% increase in 2025 might be better in the long run because it shows that the economy is more stable.
What this means for your retirement finances
The goal of Social Security COLAs is not to make retirees’ finances much better, but to keep them from losing buying power due to inflation. In fact, the small raise might not make a big difference for many retirees when it comes to their daily costs.
People who depend on these benefits may find this annoying, but it is important to remember that the COLA’s goal is to keep things stable, not give people a big pay raise.
There are other things you will need to do if you want to improve your cash situation. You could join the contract job economy, which will give you the chance to make extra money.
You could also get a part-time job, but keep in mind that there are income limits if you have not hit full retirement age yet.
Other things that can help you get more out of your Social Security check are making changes to your lifestyle, like moving to a cheaper area or finding housing that is more affordable.
Retirees who are in need can also apply for extra money, like Supplemental Security Income or SNAP Food Stamps. One more thing that will help you have a good budget in retirement is keeping your monthly costs under control.
Keep in mind that once we start getting Social Security, it can not go up. However, the COLA does help balance things out when it comes to inflation, if only a little.
Also see:-It’s Official Here’s Your Social Security Raise for 2025