It's an important day for people who receive monthly benefits.
Millions of seniors currently receive monthly benefits from Social Security, and many rely on those benefits to cover most or all of their retirement expenses.
Inflation has been rampant in recent years, making it especially tough to live on Social Security alone. Fortunately, inflation is starting to calm down, the Federal Reserve is finally considering lowering interest rates, and prices are starting to stabilize.
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But while a slower pace of inflation would be good for seniors receiving Social Security, it could have the undesirable consequence of tightening cost-of-living adjustments (COLAs) in 2025.
If you're curious to know how much your Social Security increase will be next year, mark your calendars for October 10th. That's the day the Social Security Administration (SSA) is scheduled to officially release your 2025 COLA. But it's also important to prepare for the fact that, unless inflation takes an unexpected turn in September, next year's Social Security COLA will likely be lower than it was in 2024.
What we know so far about the 2025 Social Security COLA
That's why we don't have official numbers yet, since Social Security's COLAs are based on third-quarter inflation data. We have to wait for the September Consumer Price Index, which isn't released until October 10th.
But there are projections for what next year's Social Security COLA will be, based on recent inflation data. The nonpartisan Senior Citizens League (TSCL) projects the COLA for 2025 to be 2.57%. That's significantly lower than the 3.2% increase seniors receiving Social Security received in January of this year.
But again, inflation has been higher in the second half of 2023 than it has been in recent months, so while it may be a shame to see the 2025 COLA shrink, it makes sense.
Of course, there is room for the 2.57% forecast to fluctuate based on upcoming inflation data, but historical trends suggest that this number is more likely to fall than rise.
Once an official announcement is made, act immediately.
News about the 2025 COLA can be found on the SSA website on October 10. At that time, the SSA should also release other updated figures, including the 2025 earnings test limits, maximum monthly benefit amounts, and wage caps for Social Security tax purposes.
If you're worried about your 2025 COLA, you should take action before the new year begins. Specifically, if you think you'll have a hard time paying your bills in 2025, evaluate your expenses to see if there's room to save. You could also consider relocating to a less expensive location to further increase your benefits.
If you have a big house that costs a lot to maintain, downsizing can save you a lot of money. And if you're already living as frugally as possible and don't want to (or think you can't) move, see if you can do some occasional gig work. Earning an extra $100-200 a month can easily make up for a reduced Social Security COLA.
At this point, we don't have to wait too long to find out what our Social Security benefits will be in 2025. But you might want to prepare for them to be lower than they have been in recent years.
