After the new Cost of Living Adjustment (COLA) for 2025 was officially announced; Social Security Administration is ready to include this increase in next year's Social Security benefits. Social Security is essential for most retirees, as it provides about 30% of the income of Americans age 66 and older. In fact, according to the Social Security Administration (SSA), among people age 65 and older, 15% of women and 12% of men receive more than 90% of their income from Social Security. One of the great things about Social Security is that benefits often increase to keep retirees in line with inflation, thanks to cost-of-living adjustments. There wasn't much of a celebratory mood when the latest COLA was announced.
Social Security announces increase in monthly benefits on January 1st
of Cost of Living Adjustment (COLA) Growth is an important topic for the millions of beneficiaries who rely on Social Security benefits to cover their living expenses. The latest COLA is 2.5% and was just announced to go into effect in 2025. This is very close to the average annual salary increase of 2.6% over the past 20 years. Some recent Social Security COLAs are listed in the table below.
| year | More cola |
| 2015 | 1.70% |
| 2016 | 0% |
| 2017 | 0.30% |
| 2018 | 2% |
| 2019 | 2.80% |
| 2020 | 1.60% |
| 2021 | 1.30% |
| 2022 | 5.90% |
| 2023 | 8.70% |
| 2024 | 3.20% |
Beneficiaries need to know that they are the only ones who believe the 2.5% increase is insignificant. According to a Motley Fool survey, 54% of retirees think this isn't enough. In fact, 31% of respondents thought it was “completely insufficient.” As of September, the monthly average was retirement allowance That was $1,922, or just over $23,000 a year. Most of us won't be able to support our retirement with that amount of money. A 2.5% increase would only raise it to $23,641, an increase of about $577, or just $48 per month.
Worse, unless COLA is tied to a more appropriate measure of inflation, namely CPI-E rather than CPI-W, COLA is sure to disappoint time and time again. of Consumer price index for urban salaried and office workers (consumer price index–W) While the CPI-E is intended to reflect the spending of workers, the CPI-E is intended to better reflect the spending habits of older adults. So, for example, they place more emphasis on health care, which has seen higher-than-average price increases.
How can beneficiaries plan for retirement without relying too heavily on Social Security?
bigger social security The check is probably the result of earning more than usual during your career, but it may not be enough to meet all your needs and desires. Therefore, preparing for retirement is essential. Creating several sources of income during retirement is a wise choice. There's no question that wise investing and aggressive saving are important in retirement. Decide how much money you'll need for retirement and make a plan to save it. For example, sources of retirement income include:
- I was working part-time before I retired.
- Social security benefits.
- Stock dividend income.
- Rental checks for real estate you own and rent.
- Income from one or more pension plans.
- Retirement income earned from one or more jobs that you and/or your spouse held.
- Income earned by selling stocks in the portfolio when needed.
- Income from investments that pay interest, such as bonds, CDs, and bank accounts.
- Inheritance.
Thinking creatively can provide additional income opportunities, such as cashing out a life insurance policy, obtaining a reverse mortgage, or moving into real estate. Delaying retirement by just a few years can have a big impact and lead to an increase in your retirement savings. disposable income. Regardless of your approach, it's a smart move to try to pay for the majority of your retirement savings yourself. Take the time to make a solid plan and make sure it's executed. Additionally, it's unlikely that most of your retirement income will be covered by Social Security, and you don't want it either.
