The US government announces changes to checks starting in 2025

On By Littum

The Cost-of-Living Adjustment (COLA) for 2025 has been announced by Social Security Administration (SSA)confirms one increase of 2.5 per cent in monthly payments. Although this adjustment is intended to help recipients keep pace with inflation, many are disappointed because they feel the increase cannot cover rising costs of living.

For pensioners, Social benefits is a crucial source of income, providing about 30% of their earnings. However, the modest COLA increase leaves many concerned about their financial stability. Here’s an overview of the 2025 COLA, its implications and strategies for securing your retirement.

Cost of Living Information (COLA) for 2025

  • COLA 2025 is set for 2.5%slightly below the 20-year average of 2.6%.
  • The new increase comes into effect from 1 January 2025.
  • A pensioner who receives the average monthly benefit of $1,922 want to see one $48 monthly increaseor approximately $577 annually.

Historical Coke rises

Here’s a quick overview of past COLA adjustments:

  • 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%

According to The motley foolDespite the adjustments, many beneficiaries claim the increase is not enough to keep pace with inflation. A recent study showed this 54% of pensioners feel the adjustment of 2.5% is insufficient, med 31% considers that it is completely insufficient.

Improving income security during retirement

Since Social benefits alone may not fully cover the cost of living and diversification of income sources is essential. Some practical options include:

  • Working part-time to supplement income while staying active.
  • Investment in shares, bonds or mutual funds for additional returns.
  • Earning rental income from owned properties.
  • Using savings accounts or certificates of deposit (CDs) for stable returns.
  • Utilization of employer pensions, if possible.
  • Considering reverse mortgages for additional liquidity.

Challenges in cola calculations

COLA is calculated using Consumer Price Index for Urban Wage Earners and Office Workers (CPI-W)which does not fully reflect the seniors’ spending habits. Experts advocate using Consumer Price Index for the Elderly (CPI-E)which places greater emphasis on medical expenses, a significant expense for retirees.

Tips for dealing with financial challenges

  • Evaluate your spending and identify areas to cut back, such as switching to more affordable services or downsizing your home.
  • Explore opportunities for additional income through freelance or part-time work.
  • Plan strategically by maximizing savings and diversifying income streams to ensure long-term financial stability.

With inflation and the cost of living rising, solely rely on Social security may not be enough to maintain a comfortable lifestyle. By taking proactive steps to strengthen your financial foundation, you can create a more secure and stable retirement.